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Analysis

Trump's threatened Mexico tariffs may never happen

President Trump's base may cheer his new tariffs, but most economists believe consumers will suffer, says Sky's Greg Milam.

Donald Trump threatened the "official end of Iran" in a recent inflammatory tweet
Image: Will President Trump's tariffs actually become reality?
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Donald Trump's threatened sliding scale of escalating tariffs on imports from Mexico may never become reality.

Remember his threat to close the US-Mexico border? It came to nothing.

But the mere threat of punitive action by the United States against its neighbour to the south is enough to move markets and spook the business community.

The trading relationship between the two countries is worth billions and Americans rely on imports from Mexico for everything from cheap fruit and vegetables to cars, tractors and beer.

Donald Trump threatens Mexico with 5% imports tariff over illegal immigration
Donald Trump threatens Mexico with 5% imports tariff over illegal immigration

Experts are concerned the tariff will compromise the final stages of a trade agreement between the US, Mexico and Canada

Whatever Mr Trump says or believes about who actually pays for the tariffs, most economists agree that ultimately it is the consumer who feels it in the wallet. His own economic adviser has admitted as much on television.

The farmers of the Midwest can attest to the financial impact of the tariffs imposed as part of the trade war with China. The US government has had to bail them out.

The latest move poses two questions: Are trade tariffs a legitimate tool in a dispute over immigration? And do they work?

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Mr Trump is the man who said that trade wars were good things and that they were easy to win. He has yet to prove this in office.

In fact, the new trade deal agreed with Mexico and Canada to replace NAFTA has not been ratified by Congress, much to Mr Trump's irritation. This will stymie any efforts to move things along.

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Finding a solution to the trade dispute with China has been more difficult. And Beijing may now wonder about doing a deal with a country prone to imposing new tariffs seemingly on a whim.

The US had only just lifted tariffs on Mexican steam and aluminium before this week's renewed threat.

Mr Trump's base support seems to like his tough talk on trade and immigration. They may well cheer his new tariffs, whatever the personal cost to them.

But even some in his own party have made it clear they believe tariffs are a mistake, a costly one for Americans. These are the people not prone to defying Mr Trump usually.

The president believes the action is merited because of what he sees as a national emergency on the border. But economic retribution towards a friendly neighbour makes those schooled in diplomacy uneasy.

Mr Trump will hope the threat alone will prompt the action he wants from the Mexican authorities.

If not, millions will feel the economic pain.