“Shoot first, and ask questions later.”
“Act first, then decide.”
Or as the creator of the Dilbert cartoon, Scott Adams, explained Trump best: “Try continuous A-B testing, with a bias toward action. Then adjust according to feedback.”
Trump’s threat to impose tariffs on Mexico, unless it stops illegal immigrants who must traverse 1,500 miles across Mexico to reach the U.S. border, should come as no real surprise. The flow of asylum seekers accompanied by children has been growing rapidly to unprecedented heights. Axios reports that 75,000 families crossed the border in May; that’s up from 58,000 in April.
President Obama’s DHS Secretary Jeh Johnson said on Morning Joe in March, “I know that 1,000 [apprehensions] overwhelms the system, and I cannot begin to imagine what 4,000 a day looks like.... We are truly in a crisis.” Trump and his team have been doing their own messaging for weeks and months now in a similar vein, as Trump fired his former DHS Secretary Kirsten Nielsen (by tweet, of course) and shook up the DHS staff in hopes of securing a tougher policy.
Could it be coincidental that Trump’s approval rating just hit a two-year high in the Harvard CAPS/Harris Poll survey? Trump gets a 48% approval rating overall, 59% approval for handling of the economy, and a remarkable 62% approval rating for jobs and employment. Trump likely reads these numbers as an implicit license to continue what he is doing.
It has been widely reported that the Trump administration has been working on ways to staunch the flow of cross-border crossings with and without the cooperation of Mexico. One such initiative in the works is an executive order to deny asylum to Central American refuge seekers on a blanket basis.
Thus, we maintain that on Thursday, May 30 at 2:26 pm, when Trump tweeted a surveillance camera video of 1,036 migrants attempting to cross the border near El Paso, before all were detained by Border Security agents in the largest-ever arrest of its kind, it should not be the least bit surprising that Trump would make his tariff threat, again by tweet, two hours and four minutes later at 4:30 pm.
On the web, the White House released a longer statement that is either the product of a master speechwriter, with all of Trump’s trademark verbal tics, or dictated by the President himself. The curiously exact timing at 4:30 pm, plus the longer statement, suggest to us that the decision wasn’t entirely spontaneous and that the Government of Mexico might have gotten advance notice that it was coming.
On its face, the tariff would be enormously disruptive, upsetting not only all North American trade and auto supply chains reaching all the way to Asia, but also threatening to tip the global economy into recession. On the other hand, the tariff would be less disruptive than shutting the border, which Trump has repeatedly threatened to do over immigration previously.
What’s more, the tariff would start at 5% on June 10 and escalate over time to 25% in October. The five percent is ridiculous and unreasonable in our book, but starting low and moving up suggests to us that Trump is willing to back down and reverse course if he gets an appropriate gesture from Mexico. In January, Trump was willing to shut down the US government over the issue of funding for his border wall and as a show of protest to what his base voters deem as excessive spending in other areas.
Yet Trump reversed course with no apologies and no explanation when he felt that he had made his point, and he emerged as a political winner in the eyes of his base voters nonetheless.
We think it likely that Trump will reverse course on the impending Mexican tariffs as well. The Mexican Foreign Minister is leading a team to Washington today. The Mexican President, already a seasoned Trump handler, has had the sense not to escalate. The financial markets have taken the news badly. The K Street business community is furious. Republican Senators are furious. The Wall Street Journal reports that Trump’s own USTR, Robert Lighthizer, is unhappy with the tariffs.
Meanwhile, Trump has gotten the attention he craves. Like New York Yankees idol Reggie Jackson in days of old, Trump is once again the “straw that stirs the drink.” He has made his statement, and provided that he gets some appearance of a favorable response from Mexico, he is likely ready to move on.
His base voters have gotten the message that Trump, like no previous President, is willing to act on trade and immigration and give him credit for trying, even if does not change the status quo on trade and immigration in the immediate future.
And if the feedback is entirely unfavorable, defined as something that would take the shine off a 62% approval rating for employment, Trump would likely move along as well.
USMCA is no worse off now than it was in late March, when Trump last threatened to close the border before backing off. The odds of getting USMCA through Congress by August are equally zero both yesterday and today. The odds of getting USCMA through Congress by the end of year remain as dubious, given the prospect of fall battles on suspending the debt ceiling, lifting the budget caps, and funding the government for two years in the context of standoffs over subpoenas and investigations of Trump, if not outright impeachment. There may yet be a path to getting USMCA done by the end of the year, but we will discourse on this in another note; our comment here is simply that the odds were challenged to start with, and by fall, the memory of Trump’s latest tariff threat will probably be a minor factor compared to what is happening then.
In recent days, we have been contemplating raising odds that USMCA would clear Congress by the end of the year to 50%. We will probably keep them in the 30-40% range for now.