The diplomatic rift between Mexico and the United States over who will pay for President Donald Trump’s border wall threatens to end one of the most stable and important relationships Washington has enjoyed in Latin America.
Thursday’s abrupt cancellation of Mexican President Enrique Peña Nieto’s planned visit to the United States threatens greater uncertainty about the fate of the North American Free Trade Agreement (NAFTA), which has served as a steady economic lynchpin between the two neighbors since 1994.
The potential rift threatens to undo decades of cooperation between countries that have worked hard to overcome a long history of mistrust. “There has been a steady deepening of the working relationship over the last 25 years, with occasional flare ups,” said Michael Shifter, president of the Inter-American Dialogue, a Washington think tank.
“There was an understanding that there’s too much at stake not to have that level of cooperation. Now that understanding seems to be questioned on this side of the border,” he added.
During the election campaign Trump vociferously pledged to renegotiate NAFTA, arguing that in its current form it was too one-sided in Mexico’s favor, citing a $60 billion dollar trade deficit.
U.S. and Mexican officials began talks over the future of NAFTA on Wednesday, and Peña Nieto and Trump were due to meet next week in what appeared to be a sign of willingness to settle things amicably.
But that all began to unravel Wednesday afternoon when Trump announced the expansion of the existing border wall as part of his policy to reduce illegal immigration. In media comments he blamed Mexican immigrants for taking jobs away from Americans, as well as creating insecurity on the streets of U.S. cities.
He repeated his insistence that Mexico would pay for the wall, though he did not specify how.
Peña Nieto responded late Wednesday repeating his own position that there was no way that Mexico would pay for the wall.
On Thursday morning Trump fired off a tweet making it sound like he had disinvited the Mexican president. “If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting,” he wrote.
of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.— Donald J. Trump (@realDonaldTrump) January 26, 2017
Soon after Peña Nieto announced he was canceling his visit.
Mexican-American relations have been fraught since the birth of the two countries. Mexico lost more than half its territory to the United States as a result of the Mexican-American War of 1846-48, and the U.S. notoriously meddled in Mexico’s affairs over the subsequent decades. But relations had improved impressively after the signing of NAFTA.
Now, Trump appears hell bent on redefining U.S. global interests, no matter the damage it might cause its southern neighbor, wrote Mexican historian Lorenzo Meyer in the Mexican newspaper Reforma on Thursday.
The "veil of interdependence" in U.S.-Mexican relations is being ripped off, and all that is left is for Mexico to "minimize the damage," he wrote, and maybe "reduce its enormous dependency on its northern neighbor and recover some of its independence ... and dignity."
In a worst case scenario, if U.S-Mexico relations went off the rails, the consequences could be alarming for the Trump administration. “Border security would collapse. We could also be looking at economic recession in Mexico and more Mexicans and Central Americans swarming over the border,” said Shifter.
Mexico's vastly improved police and judicial cooperation as well as intelligence sharing in the drug war, "needs to be better communicated to our president," added Maureen Meyer, a Mexico analyst with the Washington Office on Latin America. "The last thing the United States wants to do is create economic crisis in its southern neighbor," she added.
Trump has put Peña Nieto in a tough spot, experts say. On the one hand he is under pressure to stand up for Mexican national pride, while at the same time being mindful of the economic risks of a falling out with Washington.
“Political ground has shifted in Mexico. It’s no longer politically popular to stand up and say 'gee we should have this close relationship with the U.S.,'" said Eric Olsen, a Latin America expert at the Woodrow Wilson Center, in Washington.
After decades of relatively good relations between the two neighbors, Trump has ignited old enmities. Mexicans mostly loathe his hateful campaign rhetoric, tarring Mexican immigrants as rapists and criminals, as well as his bad-mouthing of NAFTA.
“So [Peña Nieto] is being pulled in that direction. To show toughness, to show self-respect, to defend Mexico’s national honor,” added Olsen.
Despite being deeply unpopular at home, Peña Nieto's many critics rallied to his defense on Thursday.
Former Mexican President Vicente Fox said on Twitter "don't mess with Mexico.” In a video message, he told Trump: “Mexico is a friend ... we understand your people, but we don't understand you."
And Trump's critics were quick to react as well. "Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad," tweeted South Carolina's Republican Senator Lindsey Graham.
Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad. (2)— Lindsey Graham (@LindseyGrahamSC) January 26, 2017
Nationalism aside, "there's a practical element here," stressed Olsen. In Mexico, "people’s livelihoods depend on the relationship with the United States [and] Mexico depends on the U.S. for its security.”
The United States is Mexico’s largest export market (77.6 percent) and the United States supplies 50 percent of Mexican imports, according to official data.
If they were a country, the 10 states straddling both sides of the border would be the fourth largest economy in the world.
Trade between Mexico and the United States has been growing annually at an average of more than 11 percent.
“Peña Nieto and his advisors understand the importance of U.S.-Mexican relations and know that Trump’s proposals could play havoc with Mexico’s already distressed economy and troubled politics,” according to Peter Hakim, a senior fellow and past president of the Inter-American Dialogue.
“They also know that a confrontation with Trump, no matter its appeal to many Mexicans, would be worse,” he wrote in an analysis of U.S.-Mexico relations last month for the Latin America Advisor.
There are also good, if not well understood, economic reasons for the U.S. to avoid a falling out.
Mexico is the United States’ third largest trading partner (accounting for 13 percent of exports and imports), directly accounting for almost 1.2 million jobs in the United States, second only to Canada, according to the Office of the United States Trade Representative.
Mexico has also become an ally in recent years in controlling a surge of migration from the gang-ridden countries of Central America, especially Honduras and El Salvador.
To avoid conflict, the Mexican government will probably have to take some unpopular steps to respond to Trump's demands, though perhaps gaining some concessions in return, Hakim added, suggesting joint efforts to curb migration and even some cost sharing for construction of physical barriers at a few border sites.
“They’re going to have to find some middle ground,” said Olsen. "But I doubt it will be ‘okay … we’ll pay for the wall’. I don’t see that happening,” he added, suggesting it was more likely that Trump would seek to recover the costs via indirect taxes. The White House said it could pay for the wall with a new 20 percent tax on goods from Mexico.
“I don’t see any way from a political point of view that Peña Nieto could agree to pay for the wall. It would be political suicide,” he added.