Trump’s Pragmatic Tariff Plan is Already Moving Mexico.

At the very least, given Mexico’s immediate response and attempt to negotiate on this matter, we can agree tariffs are an effective tool to cause action from previously unwilling parties.

Layers of Constantinia are added to existing barrier infrastructure along the U.S. - Mexico border near Nogales, AZ, on February 4, 2019. Photo: Robert Bushell

On Tuesday Mitch McConnell stood before a group of Republican Senators and boldly proclaimed “we are not fans of tariffs.”

Taking tariffs in isolation, McConnell would have unanimous support for the statement. You would find similar sentiment for concepts like taxes, jail, and war – nobody is a “fan” of any of these things.

The situation at the border is nothing short of a crisis.

We all agree they are appropriate mechanisms to achieve some other outcome. Context like this is required to properly evaluate the President’s proposal to place tariffs on Mexico.

President Trump campaigned and was elected on a promise to solve our issues on the southern border. Even critics must agree he has taken his campaign promises seriously, and has meticulously attempted to go down that list and check each one off.

The situation at the border is nothing short of a crisis.

Over 1000 migrants detained at the border (CBP/Flickr)

We have people pouring across from origins unknown, in many cases bringing with them drugs and crime. It is imperative for any country to have an enforceable border to grant entry in an organized manner to individuals deemed safe and appropriate for that country’s situation and needs.

Despite what one might hear on cable news, there is not much disagreement among Americans on whether we should have a border we can control.

The President is a pragmatic problem solver…

The President is a pragmatic problem solver, and as such his instinctual attempt to address this issue was to “build that wall”.  What he has found since taking office is that the problem is more complicated and not so easy to address. 

First, he requires congressional approval for the finances to both build his wall and to allocate the incremental resources required to deal with the heightened flow of migrants. As a legal matter, existing law does not allow children to be held for longer than 20 days – a time period not nearly adequate to process individuals given the enormous numbers and insufficient staffing.

And as a political matter, members of Congress on both sides of the aisle have been unwilling to even attempt to solve this problem. The issue of enforcing the border has been falsely equated to one of race, fairness, and authoritarianism. After two years into the President’s first term, the border crises has worsened due to the intransigence of his opponents.

Protesters at the West County Detention Facility. (Peg Hunter/Flickr/CC)

The menu of options now available to the President is simple. He can:

1) DO NOTHING – This has been the option of choice for the last three decades, leading to millions of undocumented immigrants in the country, and partisan infighting on what is or isn’t “fair”.

Given ubiquity of the internet and smartphones combined with well-funded organizations determined to aid migrants in their “asylum” claims upon entry into Western countries, the “Do Nothing” option can only be expected to lead to more migration in coming years. 

2) LEGISLATE AND ENFORCE – This was the option chosen by America’s Founding Fathers.

Congress passes laws necessary to deal with problems facing the American people, they allocate appropriate funding to have those laws enforced, and the Executive Branch uses those funds to enforce those laws. It is the best system known to Man, but our elected officials are too fearful of political consequences to attempt to address an issue so politically charged. The President has tried, and clearly this is not going anywhere absent a wholesale replacement of leaders in Congress. 

3) EXECUTIVE ACTION – the President can use whatever powers granted him by the Constitution. 

One must give President Obama some credit on this. When faced with the identical menu of options, he chose this same option to achieve his desired outcome: protecting illegal immigrants through the implementation of DACA.

President Trump desires a different outcome: to control and enforce the border. In the absence of any assistance from the other branches of government, he has wisely looked to coerce action from Mexico.

Border protest, Peg Hunter (Flickr/CC)

Make no mistake, tariffs and immigration have no inherent connection, but the President has identified the most important asset available to us is not our military. In a nuclear world a “guns up” conflict of any size is both politically and practically unfeasible.

The most valuable and persuasive asset we have is the American consumer.

Countries like China and Mexico are dependent on U.S. consumers to finance their economies.

Many of these countries use illegal behavior to create competitive advantages for themselves to gain access to us, often to the detriment of American competitors. The President has taken bold action to curtail this behavior, with no situation more acute than that of China. 

The President has taken bold action to curtail this behavior, with no situation more acute than that of China.

In the case of Mexico, aside from taking advantage of and breaking rules to gain access to the American consumer, the Mexican government also stands idly by while Mexican cartels operate lawlessly across our shared border, and “asylum seekers” from Central and South America march through in an effort to cross into the United States.

It is evidently within the power of the Mexican government to address both issues. But it is simply not in the interest of Mexico to do so. Just like China and other countries the President has opened negotiations with, our counter parties need to be presented with a worse outcome than the status quo in order to force action. History has repeatedly proven that kind words and diplomatic summits aren’t enough.

President Trump at the border

The President has presented Mexico with that worse outcome. 

Senator McConnell is correct when he says, “tariffs are bad”. But they are bad for Mexico too. And taken in the context of attempting to curtail the lawless flow of people and drugs across the southern border, this “bad outcome” may be the best available option on the menu.

At the very least, given Mexico’s immediate response and attempt to negotiate on this matter, we can agree this is an effective tool to cause action from previously unwilling parties. Senator McConnell is the person who can help legislate a better option, but his inaction and grandstanding are par for the D.C. course. Kudos to the President for attempting to solve the problem.

John A. Thaler is the founder of JAT Capital Management LP, a global equity investment firm

Written By: