Mex­ico must be ready to re­spond to bor­der tax, min­is­ter says

The Globe and Mail (Prairie Edition) - - OPINION -

Mex­ico must be ready to re­spond im­me­di­ately with its own tax mea­sures if the in­com­ing ad­min­is­tra­tion of U.S. pres­i­den­t­elect Don­ald Trump im­poses a bor­der tax, the econ­omy min­is­ter said on Fri­day, warn­ing such pro­tec­tion­ism may trig­ger a global re­ces­sion.

Mr. Trump, who takes of­fice on Jan. 20, has promised a “ma­jor bor­der tax” on com­pa­nies that shift jobs out­side the United States, and such a mea­sure could hob­ble Mex­ico’s ex­ports to its top trad­ing part­ner.

“It is clear we need to be pre­pared to im­me­di­ately neu­tral­ize the im­pact of such a mea­sure,” Econ­omy Min­is­ter Ilde­fonso Gua­jardo said in an in­ter­view on Mex­i­can tele­vi­sion.

“And it is very clear how – take a fis­cal ac­tion that clearly neu­tral­izes it,” he said.

Mr. Trump has re­peat­edly at­tacked Mex­ico over trade, jobs and im­mi­gra­tion since he first launched his run for the White House in 2015, driv­ing the peso cur­rency to his­toric lows and un­nerv­ing in­vestors, es­pe­cially in the auto sec­tor.

Mr. Gua­jardo said Mr. Trump’s pro­posed tax “was a prob­lem for the en­tire world” and that it “would have a wave of im­pacts that could take us into a global re­ces­sion.”

Nonethe­less, the min­is­ter said he ex­pected for­eign di­rect in­vest­ment in Mex­ico this year to to­tal around $25-bil­lion (U.S.), with in­vest­ment in the en­ergy and telecom­mu­ni­ca­tions sec­tors ex­pected to more than make up for the loss of a planned $1.6-bil­lion Ford Mo­tor Co. fac­tory that the com­pany said this month it is can­celling. Mr. Trump had strongly crit­i­cized the plan, but Ford said its de­ci­sion was not the re­sult of pres­sure from Mr. Trump.

Mr. Gua­jardo also praised the gov­ern­ment of Ja­pan and Toy­ota Mo­tor Corp. for their “rea­son­able” re­sponse to Mr. Trump’s threat to im­pose a sig­nif­i­cant bor­der tax if the com­pany does not stop mak­ing its Corolla model in Mex­ico for the U.S. mar­ket. Toy­ota said last week that it has no im­me­di­ate plans to curb pro­duc­tion in Mex­ico.

“Toy­ota has 10 plants in the United States … and em­ploys more than 130,000 Amer­i­cans. If I were Mr. Trump, I’d treat them with more re­spect,” Mr. Gua­jardo said.

He added that he ex­pects to­tal for­eign di­rect in­vest­ment dur­ing the six-year term of Pres­i­dent En­rique Pena Ni­eto, which ends in late 2018, to av­er­age $30-bil­lion an­nu­ally.

Mr. Gua­jardo has pre­vi­ously warned that U.S. cor­po­rate tax cuts pro­posed by Mr. Trump, as well as the bor­der tax, could un­der­mine for­eign in­vest­ment in Latin Amer­ica’s No. 2 econ­omy.

Mex­ico slapped a tax on U.S. high-fruc­tose corn syrup in the early 2000s af­ter the United States re­fused to al­low free trade in Mex­i­can sugar.

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