Mexico’s president celebrates tariff delay but looming threat rattles companies on both sides of the border

From KTEP:

MEXICO CITY – President Claudia Sheinbaum celebrated big Sunday at El Zócalo, the country’s largest public square in downtown Mexico City, after securing a second delay — at least for another month — on punitive U.S. tariffs targeting Mexican exports.

The gathering of tens of thousands of supporters, initially planned as a forum to inform Mexicans about her government’s planned retaliation against the 25% levy unilaterally imposed by U.S. President Donald Trump, quickly transformed into a celebration of Mexico’s first female leader and her apparent diplomatic win.

Trump agreed late last week to postpone the tariffs once again. Even more significantly, Sheinbaum said she secured an agreement ensuring that any future levies on Mexico’s exports would be included in a broader reciprocal agreement to take effect in April.

“We are optimistic!,” Sheinbaum declared to the cheering crowd. “Because on that day, April 2, the United States government has announced it will impose reciprocal tariffs on all countries in the world. . . and since we do not have tariffs with them, nor do they with us. . . these reciprocal tariffs will not apply.”

Despite the celebration, the battle is far from over. The threat of clashes with the U.S. continues to loom large after Trump designated Mexican drug cartels as terrorist organizations in mid-February. That move fueled speculation that his administration is considering military action in Mexico.

Trump’s top economic adviser, Keven Hassett, told ABC News Sunday that the administration was using tariffs to launch “a drug war, not a trade war,” with Canada and Mexico.

In linking Mexico’s exports, some 80 percent of which go to the United States, to the country’s often ineffective fight against organized crime, Trump has tapped into Mexico’s biggest vulnerability, experts on both sides of the border say.

The designation threatens future U.S.-Mexico cooperation and could foment nationalism in Mexico. It’s one more factor that has business leaders and citizens alike on edge in Mexico.

“Issuing a national threat is like throwing a bomb that can explode at any moment,” said Pablo Mijangos Gonzalez, a Mexican historian of politics, religion and laws in Latin America at Southern Methodist University in Dallas. “The Mexican government will remain vulnerable, permanently vulnerable to Trump’s extortion threats. What Trump was doing was looking for a weak spot and he found it.”

Meanwhile, with the new tariff deadline of April 2 looming, many companies along the border are frantically preparing.

Some companies are pumping the brakes on future investments. Others are stockpiling as much as they can, filling warehouses with automotive parts, electronic components and other nonperishable items including Tequila. The lines of cargo trucks at border crossings is also long as companies try to move their products as the new deadline fast approaches.

“A lot of these companies are trying to bring products in before they get slapped with tariffs,” said Jerry Pacheco, president of the Border Industrial Association, in Santa Teresa, New Mexico, home to a busy border crossing and industrial park serving the region that also includes west Texas and Chihuahua.

“It’s just amazingly disruptive to production,” he added of the chaos. “Businesses want stability. They don’t need this kind of environment.”

Trump’s trade threats come at the worst possible time for Mexico’s economy. The last thing Sheinbaum needed as she took office last October was a standoff with Mexico’s largest trading partner.

This will undoubtedly make it harder for Sheinbaum, 62, to achieve her long-term goals and cement her legacy as Mexico’s first woman president — one who must now prove she can be tough, resilient and successful under relentless pressure from abroad and within.

After booming the first half of last year —– fueled by government spending on massive, troubled public infrastructure projects and other spending to boost Sheinbaum’s presidential campaign – economic growth has screeched to a halt.

The country’s gross domestic product (GDP) shrank 0.6% last autumn, marking its first contraction in three years, since the COVID-19 pandemic induced an economic crash in of 2020. That crisis shut down most economic activity for nearly three months.

The impact is evident: in the final quarter of last year, Mexico received just $676 million in foreign direct investment (FDI), —the smallest amount for any three-month period since 1985.

The figure has alarmed economists, who see it as the clearest sign yet that the prospect of a second Trump presidency has scared investors away from Mexico. Some U.S. factories along the border have either pulled out, or have taken a wait-and-see-attitude.

While Sheinbaum deserves credit for defusing many of the political bombs Trump has thrown at her government, the real dilemma is that she will likely have to navigate these conditions for at least the next four years of Trump’s term, which could be turbulent.

Moreover, Sheinbaum, while drawing a firm line against any unilateral U.S. strikes on Mexican soil, has repeatedly emphasized her willingness to cooperate in stopping drug trafficking. She’s gone further than her predecessor’s “hugs not bullets” strategy. President Andrés Manuel López Obrador’s effort focused on what he called the root causes of crime and mostly avoided violent confrontations with criminals. That led to more states falling under the influence of organized crime say experts.

A few days ago, negotiations to avert the tariffs appeared to be going smoothly — until they weren’t. The breakdown came despite Sheinbaum delivering 29 cartel leaders to U.S. authorities, including the leaders of the paramilitary group known as Los Zetas who terrorized cities along the Texas-Mexico border and Rafael Caro Quintero, the much-wanted drug lord accused of orchestrating the 1985 kidnapping, torture, and murder of Drug Enforcement Agent Enrique “Kiki” Camarena.

Still, the unexpected dynamic between Sheinbaum and Trump could, at times, work to her advantage — such as leveraging pressure from Trump to crack down on some of Mexico’s most violent criminal organizations, which control vast territories and, in some cases, have ties to high-ranking government officials.

Sheinbaum has an opportunity to shine here, analysts say, but she must tread carefully. Many security analysts believe that some top-ranking public servants and members of her own party have ties to drug cartels — –making this an almost impossible cleanup mission.

“She needs to clean house,” Mijangos said. “She needs to get rid of some extremely toxic people, beginning with some members of her own political coalition.”

On other fronts, however, Trump’s constant threats could become a major source of distraction, pulling her away from domestic priorities she hoped to focus on — most notably, fixing the dire fiscal situation she inherited from López Obrador.

Sheinbaum understands that Trump could reverse course at any moment, making this latest reprieve just another temporary victory. She also knows the battle is far from over. Trump’s unpredictability remains a constant threat, something she learned firsthand. Perhaps that’s why she insists on cooler heads prevailing in the fluidity of the bilateral relationship.

Far from generating nationalism, Sheinbaum reminded her supporters that the United States, which ended up with half of Mexico’s territory under the 1848 Treaty of Guadalupe Hidalgo, lent its support on several critical historical occasions.

“I also want to highlight the good examples of respect for our sovereignty from the United States,” Sheinbaum told the massive crowd, listing several actions its northern neighbor has taken in support of Mexico For example, in 1861 when Mexico’s legendary president, Benito Juarez, received invaluable help from his President Abraham Lincoln, in Mexico’s fight against the French invasion. “The U.S. never recognized the second empire” of French envoy, Maximiliano de Habsburgo, Sheinbaum reminded Mexicans in the packed Zocalo.

Unfortunately for Sheinbaum, not only does her country have to contend with tariff threats but now Trump’s seeming disregard for honoring signed agreements including the U.S. -Mexico-Canada trade pact negotiated during his first term as president.

“This administration doesn’t care about the niceties of treaties and the rules within them,” said Shannon O’Neil, a senior fellow for Latin American studies at the Council on Foreign Relations and author of The Globalization Myth: Why Regions Matter.

This story was edited by Dudley Althause and co-published with Puente News Collaborative in partnership with KTEP. Puente News Collaborative is a bilingual nonprofit newsroom, convener and funder dedicated to high-quality, fact-based news and information from the U.S.-Mexico border.