By: Octavio de la Torre de Stéffano
President of Concanaco Servytur
Trade policy decisions not only affect prices or markets in the short term, but also generate far-reaching effects on investment, economic stability, and business confidence. The recent imposition of 25% tariffs on imports from Mexico and Canada by the U.S. government was a reckless move, but what is more problematic is the lack of foresight about its effects in the medium and long term.
An Extension That Does Not Change the Uncertainty
After talks between the leaders of Mexico and the United States, a one-month extension was agreed before the implementation of the tariffs, a positive result of the strategy of our President Claudia Sheinbaum. However, this postponement does not eliminate the problem, but rather prolongs the uncertainty for investors and entrepreneurs.
In the markets, time is money, and risk breeds’ caution. Foreign and domestic investments in export sectors depend on stability and clear rules. With this type of measure, a volatile environment is generated that can discourage the inflow of capital and slow down economic growth.
Governments Must Reflect on The Long-Term Impact
Poorly focused protectionism not only affects the relationship between countries, but changes the geopolitical conditions of the entire region. Markets and economic interests do not follow the same political logic as governments. While they play with discourses of pressure and commercial sovereignty, entrepreneurs make decisions based on real risks and opportunities.
These types of measures not only damage the trade relationship between the U.S. and Mexico, but also opens the door for the rules of the game to change rapidly, affecting all actors in trade. Businesses need stability to operate and plan for the long term. If governments do not take these factors into account, the consequences will be deeper than a simple price fluctuation.
A Business Sector with a Territorial Structure
One of the biggest mistakes in the narrative of these trade conflicts is to minimize the impact on the business sector. In Mexico, the export sector is not only made up of a small group of privileged entrepreneurs. The network of small and medium-sized enterprises that depend on trade with the U.S. is huge and critical to the country’s development.
To think that these types of measures only affect a handful of large businessmen is to ignore Mexico’s business base. From suppliers to distributors, from manufacturing to logistics, a trade war is hitting thousands of companies and workers. If the governments of both countries do not generate adequate public policies to respond to these attacks, the damage will be irreversible.
The Danger of Improvised Trade Policy
International trade is not a game of improvisation or populist speeches. These types of decisions must be made with a long-term view and considering the real impact on economic stability. While extra time may seem like a momentary respite, the damage to confidence has already been done.
If governments continue to use tariffs as a political bargaining chip, entrepreneurs will look for alternatives, reconfiguring supply chains and exploring new markets. In a globalized world, investors don’t wait for governments to agree, they simply go where the rules are clear and the risk is lower.
We are at a moment in history when there should be no division between the private sector with genuine interests of benefit to Mexico and the political-public sector, so reforms and decisions must be more thorough, consensual, fair, balanced and proactive.
Political leaders have to decide whether they want to be architects of growth or uncertainty. Because when you play with fire in trade policy, burns can be deep and long-lasting.
*The author represents 5.2 million businesses in the commerce, services and tourism sector through 258 business chambers with more than 1,000 offices and coverage in 1,857 municipalities in Mexico, being the oldest, largest and most structured organization in the country for 107 years.
