2019-10-22 09:40:221970-01-01 00:00:00

Mexico Warns Retaliation

US President Donald Trump has made an announcement on May 30th that the United States is planning to impose a 5% tariff on all Mexican exports to America on June 10th. This policy is aiming at forcing the Mexican government to resolve the problem of illegal immigrants crossing the border to the United States.  He also noted that if the migration situation is not improving, the tariff will gradually increase, reaching 25% on October 1st.

Trump back-tracked claiming that before launching the new tariffs, he will give Mexico a year to curb illegal cross-border behaviour, which eased the threat he had proposed before to completely close the Mexico border and install tariffs next week. The Mexico government then responded that if the United States implements the new tariffs, Mexico will strongly strike back.

Mexico’s Economy Minister Graciela Márquez said that if the United States continues to implement tariffs, Mexico can take several routes in response. The first is to resort to multilateral organizations such as the World Trade Organization, even though these processes are time-consuming and with no-prevail. The other is to impose tariffs on selected US goods for retaliation. Last year in 2018, Mexico imposed tariffs on US imports to the tune of US$3 billion, including bourbon, pork and steel products. The dispute was resolved in an agreement reached last month in May. The US trade representative announced that it would cancel the tariffs on  Canada and Mexico’s steel and aluminium, and in-return Canada and Mexico will also repeal its retaliatory tariffs on US goods.

At the end of November last year, the representatives of the United States, Mexico, and Canada signed a new trade agreement, the USMCA, replaced the North American Free Trade Agreement (NAFTA) established in 1994. If the US implements new tariff policies against Mexico, it would be a conflict to the original intention of recently established agreement.

The impact of New Tariffs

Imposing tariff is a double-edged sword that not only hurts both parties but also affects the world economy and leads to a significant volatility in global financial markets. Mexico is famous for its agricultural products such as avocados and agave, it’s also a manufacturing centre and the location of many American companies factories. Such as Ford Motors, General Motors, John Deere, IBM and Coca-Cola. Despite many American companies basing operations in Mexico, there are thousands of other multinational companies operating there as well.

As the tariff news broke, the Mexican peso depreciated against the US dollar, and the decline of US stock futures have also expanded.

According to Mexican officials, threatening tariffs would hurt both economies, and the effect on consumers and employment is much greater than the direct currency impact on Mexico’s annual US$350 billion exports to the US. Mexico’s deputy foreign minister and chief trade negotiator, Jesús Seade claimed that as a result of the supply chain integration, some auto-parts will cross the border about eight times before the final assembly of the vehicle, each time incurring a 5% tariff. The US Consumer News and Business Channel (CNBC) published an article on June 1st, saying that a 5% tariff on Mexican exports to the US will lead to a surge in vehicle pricing, and many Americans will be forced to abandon their future car purchase plans.

Some of the Japanese automobile companies’ share-price, such as Mazda, Nissan and Honda, experienced a steep decline as the cars consumers receive in the US are manufactured in Mexico. The Nikkei 225 index fell more than 1% after the announcement, hitting a new low since February. It is highly likely that the US-Mexico tariff policy will indirectly increase the trade friction between the US and Japan.

Mexico’s response to Migration issues

There is no doubt from either side of politics in the U.S. that illegal immigration is an issue. From January to April this year, the Mexico government has arrested more than 51,000 illegal immigrants, which is an increase of 17% over the same period last year. The reason for the illegal immigrant is mostly because of low living standards in their home country. The new tariff would possibly further weaken the Mexican economy and could prompt more Mexicans to cross the border, which is contrary to the Trump administrations original objective on US-Mexico immigration issues.

The Mexican government has indicated that it has stepped up its efforts in Southern Mexico to curb immigration inflows. Since December last year, more than 80,000 people have been returned to their country of origin, predominantly to Honduras, Guatemala and El Salvador. Mexico also said that without these efforts, a further 250,000 immigrants would reach the US border this year.

The Mexican government claimed it has always been cooperative with the US on dealing with immigration issues. Mexican President Andrés Manuel López Obrador insisted that dialogue is the way to resolve disputes and that he hopes to maintain friendly relations with Mr Trump and the U.S.

By Louis Cai

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial