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Is This The Real Reason Tariffs On Mexico Got Suspended?

A couple of late Friday tweets have managed to avert an event that would have caused a great amount of distress to the US refining industry – the imposition of tariffs on all goods imported from Mexico. In a fast-moving negotiation scuffle, President Trump first announced the levy of sanction on May 30, only to have them „indefinitely suspended” having received guarantees from Mexico on tightening the southern border security. Although it is true that the oil sector would not have been the biggest victim of the potential tariffs, automobiles and agriculture would suffer more, the eschewal of escalation saved US refiners from direct multi-million losses and severe sourcing problems.

One could hear a unified sigh of relief when the tariffs were called off. Implemented under the International Emergency Powers Act of 1977, the tariff plan would have seen the first 5 percent levied on June 10, 2019, with additional 5-percent hikes slapped on Mexico for every month in which the Mexican authorities fail to stop the wave of migrants towards the United States. The ultimate threshold was set at 25 percent (for all goods, services are not subject to sanctions). As we will see further on, the White House need not even go the full way in sanctioning Mexico to render US-Mexico crude trade economically unviable, even a 10-15 percent hike would be enough to do that. Yet the underlying truth is that was Mexico to be sanctioned, there is no one to replace it with.

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