WEBVTT - Mexico’s High-Stakes Gamble in Dealing With Trump 0:00:00.320 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:16.520 --> 0:00:19.439 I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 0:00:19.560 --> 0:00:22.400 and this is trump Anomics, the podcast that looks at 0:00:22.400 --> 0:00:25.640 the economic world of Donald Trump, how he's already shaped 0:00:25.680 --> 0:00:28.319 the global economy, and what on earth is going to 0:00:28.360 --> 0:00:34.159 happen next. Well, this week we're looking at how the 0:00:34.200 --> 0:00:37.240 country with the most to lose from Donald Trump's trade 0:00:37.280 --> 0:00:41.160 wars is trying quietly to win them. In the world 0:00:41.159 --> 0:00:44.000 of Donald Trump, you don't always want to be where 0:00:44.000 --> 0:00:47.000 the action is. As I record this on Tuesday, twenty 0:00:47.000 --> 0:00:50.159 eighth of October, most eyes are on Asia as the 0:00:50.159 --> 0:00:54.240 President tours the region, making deals and headlines wherever he goes, 0:00:54.640 --> 0:00:56.840 and at least as of now, he'll be meeting the 0:00:56.920 --> 0:00:59.800 Chinese president later in the week to seal what is 0:01:00.080 --> 0:01:03.760 already been billed as a great victory in his trade 0:01:03.800 --> 0:01:07.120 war with that country. In fact, it's China who probably 0:01:07.120 --> 0:01:10.200 now has the upper hand in that conversation and future ones. 0:01:10.240 --> 0:01:12.560 And if you want to understand why, just listen to 0:01:12.600 --> 0:01:15.760 the last episode of Trumpnomics with Arthur Kroeber. So instead, 0:01:15.840 --> 0:01:18.080 my focus this week is on a country which has 0:01:18.200 --> 0:01:21.560 largely avoided the headlines since President Trump came back to 0:01:21.600 --> 0:01:24.759 the White House, but as one of America's largest trading partners, 0:01:24.800 --> 0:01:28.600 has arguably even more at stake than China and a 0:01:28.600 --> 0:01:33.040 lot weaker cards. Mexico sends a whopping eighty three percent 0:01:33.120 --> 0:01:36.039 of its exports to the US on some measures, and 0:01:36.120 --> 0:01:39.640 every time the President talks about blanket tariffs on the country, 0:01:40.040 --> 0:01:44.760 its economy shudders. Yet somehow that hasn't happened. There have 0:01:44.800 --> 0:01:48.560 been continual reprieves, and most of the credit goes to 0:01:48.600 --> 0:01:53.720 Mexico's President, Claudia Scheinbaum, now entering her second year. So 0:01:53.920 --> 0:01:59.040 how exactly has Mexico's first female president navigated the Trump 0:01:59.120 --> 0:02:04.240 era so skillfully? And what's at stake in her continuing 0:02:04.280 --> 0:02:07.440 to pull it off? Those are the questions we're answering 0:02:07.520 --> 0:02:11.079 in this episode, And because we're Bloomberg Economics, we've brought numbers. 0:02:11.280 --> 0:02:15.960 By our estimate, the difference for Mexico, for President Chinbaum 0:02:16.120 --> 0:02:19.360 between managing this right and managing it wrong over the 0:02:19.360 --> 0:02:22.600 next few years, we Reckon comes down to more than 0:02:22.760 --> 0:02:27.360 four thousand dollars worth of additional economic growth for every man, woman, 0:02:27.440 --> 0:02:30.720 and child in Mexico between now and twenty thirty. It's 0:02:30.760 --> 0:02:33.560 on the good scenario, Mexico could even end up growing 0:02:33.600 --> 0:02:36.720 faster than the US for the first time since two 0:02:36.760 --> 0:02:40.120 thousand and eight. Probably won't want President Trump to notice that, 0:02:40.440 --> 0:02:42.919 but as we're going to be hearing, that rosy outcome 0:02:43.160 --> 0:02:46.440 is indeed far from guaranteed, So let's get into it. 0:02:46.960 --> 0:02:49.960 Alex Vasquez is one of our economy and government reporters 0:02:49.960 --> 0:02:51.720 in Mexico City joining me now. 0:02:51.800 --> 0:02:54.680 Alex, welcome, thank you, thank you for having me. 0:02:55.040 --> 0:02:58.440 And in New York's Felipe Hernandez, who covers Latin America 0:02:58.480 --> 0:03:01.200 for US at Bloomberg Economy. He's got more than fifteen 0:03:01.240 --> 0:03:04.560 years experience covering Latin America for Bloomberg, but also at 0:03:04.560 --> 0:03:16.160 firms including Banco Santander and Deutsche Bank. I think it's 0:03:16.160 --> 0:03:18.120 the first time for both of you. How has it 0:03:18.160 --> 0:03:20.320 taken me so long? I guess that's another sign that 0:03:20.360 --> 0:03:23.480 Mexico has quite happily been staying out of the headlines 0:03:23.639 --> 0:03:27.960 over the last few months. Alex, remind us where we 0:03:28.040 --> 0:03:31.680 are in the negotiations between the US and Mexico. As 0:03:31.720 --> 0:03:34.760 I mentioned, it seems like no news has been good news. 0:03:35.360 --> 0:03:40.360 Yeah, I think shambong has managed to I think the 0:03:40.520 --> 0:03:45.320 big achievement is to stay away of confrontation with Trump. 0:03:45.920 --> 0:03:50.320 She doesn't speak much, and I think that something Trump appreciates, 0:03:51.360 --> 0:03:54.920 and she has given him what he wants. She has 0:03:54.960 --> 0:03:58.880 helped to stop migration by sending the National Guard to 0:03:58.920 --> 0:04:04.080 the border. She has handed the US some important drug 0:04:04.080 --> 0:04:05.280 traffickers that were. 0:04:05.280 --> 0:04:06.440 Jailed in Mexico. 0:04:06.800 --> 0:04:12.040 Right now, Mexico I think is the best country position 0:04:12.160 --> 0:04:16.279 regarding tariff and regarding trade with the US because even 0:04:16.360 --> 0:04:19.560 compared with Canada, which is also part of the US 0:04:19.720 --> 0:04:24.720 Mexico and Canada trade agreement, I think Mexico doesn't have 0:04:24.880 --> 0:04:28.640 like reciprocal tariff. It only has twenty five percent tariff 0:04:28.920 --> 0:04:33.200 related to fentannel trafficking, but most of the Mexican goods 0:04:33.720 --> 0:04:36.560 are free of tariff thanks to the trade deal. So 0:04:36.600 --> 0:04:40.719 she has managed to do pretty well. Canada has higher tariff. 0:04:41.320 --> 0:04:45.120 And she announced in a press conference that we had 0:04:45.320 --> 0:04:49.520 a deadline for November first to race tariff in Mexico, 0:04:49.880 --> 0:04:52.680 and she announced that it was extended again. 0:04:54.600 --> 0:04:58.000 I spoke with President Trump on Saturday, and we are 0:04:58.040 --> 0:04:59.800 going to give it a few more weeks to be 0:04:59.839 --> 0:05:02.640 a able to close the issue that is already very 0:05:02.680 --> 0:05:07.560 advanced regarding the fifty four non tariff barriers. So we 0:05:07.680 --> 0:05:10.599 agree to speak again in a week or so because 0:05:10.640 --> 0:05:14.200 we are practically already closing this issue, because ultimately on 0:05:14.279 --> 0:05:19.400 November one, that deadline closes that we had both set 0:05:19.440 --> 0:05:20.600 for ourselves. 0:05:21.080 --> 0:05:23.680 Trump has mentioned that he has a lot of respect 0:05:23.720 --> 0:05:27.200 for her, and you can tell that when she is 0:05:27.240 --> 0:05:30.320 the one that announces in a press conference that they 0:05:31.400 --> 0:05:34.839 had a phone conversation and they reach a deal to 0:05:34.960 --> 0:05:39.960 continue negotiating, but that means no more tariff. So I 0:05:40.000 --> 0:05:43.400 guess the big win is never engaged in a confrontation 0:05:43.600 --> 0:05:47.680 and she never retaliated with tariff from Mexico. But obviously 0:05:48.120 --> 0:05:50.880 there's a lot at stake because Mexico sends to the 0:05:51.000 --> 0:05:52.880 US more than eighty percent of it. 0:05:52.960 --> 0:05:57.640 Techsp so she has to have a good relationship with Trump. 0:05:57.960 --> 0:05:59.839 I mean, we do tend to think about this and 0:06:00.040 --> 0:06:03.280 terms of a sort of balance of power and some 0:06:03.360 --> 0:06:06.359 of the countries, certainly the countries with very little leverage. 0:06:06.400 --> 0:06:08.839 I'm thinking of some African economies and others that are 0:06:08.880 --> 0:06:12.680 facing very high reciprocal tariffs. That does seem to be 0:06:12.800 --> 0:06:18.320 about America sort of using its raw force to impose 0:06:18.360 --> 0:06:21.040 things on other countries. Whereas we pointed out last week 0:06:21.040 --> 0:06:23.479 with China, China has been very good at using the 0:06:23.560 --> 0:06:27.120 leverage it has. It's particularly its control over these key 0:06:27.200 --> 0:06:30.480 parts of the global supply chain, these rare earth magnets. 0:06:30.600 --> 0:06:32.760 If you look at Mexico on the face of it, 0:06:32.880 --> 0:06:35.840 you know it has It's a much smaller economy, has 0:06:35.920 --> 0:06:39.000 much less to bring to the table, and these negotiations, 0:06:39.640 --> 0:06:42.599 you say, she's given him everything he wants, but she 0:06:42.640 --> 0:06:45.000 hasn't given him anything on the trade front, which is 0:06:45.000 --> 0:06:48.120 obviously the most important for Mexico. Are there hidden forces 0:06:48.160 --> 0:06:51.840 that are tipping the balance economically in favor of Mexico 0:06:51.920 --> 0:06:55.760 in these negotiations? How has she managed to have this 0:06:55.960 --> 0:06:58.680 ongoing reprieves where you know we're in China. They had 0:06:58.720 --> 0:06:59.640 to actually threaten all this. 0:06:59.680 --> 0:07:03.599 Other have to get that Mexico is next to the 0:07:03.720 --> 0:07:08.440 US and both economy are highly integrated. Sometimes to make 0:07:08.800 --> 0:07:13.640 a car or even an auto part, the same piece 0:07:13.800 --> 0:07:17.320 goes through the border several times. So I think a 0:07:17.360 --> 0:07:21.880 lot of US companies have operations in Mexico. 0:07:22.200 --> 0:07:24.440 We know the labor force is cheaper here. 0:07:24.840 --> 0:07:29.400 Mexico has a pretty good manufacturing so I think Trump 0:07:29.400 --> 0:07:31.600 has faced a lot of pressure. 0:07:31.600 --> 0:07:34.480 From different interests in the US. 0:07:34.880 --> 0:07:38.920 They pretty much don't want to have bad relationship with 0:07:39.000 --> 0:07:42.680 Mexico because there's a lot of economic interests in Mexico. 0:07:43.160 --> 0:07:45.320 Does she ever talk about that, Does she ever say 0:07:45.600 --> 0:07:50.640 speak directly to these big car manufacturers and others highlight 0:07:50.800 --> 0:07:53.760 the stake orders she just letting them do the talking. 0:07:54.200 --> 0:07:57.000 Yeah, I mean she always mentions like, we have great 0:07:57.160 --> 0:08:01.520 car manufacturers in Mexico. Even US companies are here for 0:08:01.840 --> 0:08:02.800 general motors. 0:08:03.080 --> 0:08:05.400 They have big plants here in Mexico. 0:08:05.600 --> 0:08:08.760 So it's not that easy to move production to the 0:08:08.880 --> 0:08:11.880 US in four years or in a year. So I 0:08:11.920 --> 0:08:14.600 guess a lot of people in the US know that, 0:08:14.880 --> 0:08:18.400 and that's why he's getting in the pitch. It sounds 0:08:18.440 --> 0:08:20.840 good the companies are coming here and they're living in 0:08:20.840 --> 0:08:23.480 other countries, and we're going to produce more in the US. 0:08:23.880 --> 0:08:27.080 But in reality, you need to have factories in Mexico, 0:08:27.120 --> 0:08:30.960 and she knows that. I guess that's her leverage. Even 0:08:31.000 --> 0:08:33.120 if he wants to. It's not that easy to move 0:08:33.160 --> 0:08:36.480 that production to the US in one, two or three 0:08:36.600 --> 0:08:37.360 four years. 0:08:37.960 --> 0:08:40.360 So Philippe, we were quite interested in what was at 0:08:40.400 --> 0:08:44.959 stake for Mexico over the next few years in managing 0:08:45.320 --> 0:08:47.960 to dodge this particular bullet and did get some of 0:08:48.000 --> 0:08:53.480 her other policies right. And you've helped Bloomberg reporters Alex 0:08:53.520 --> 0:08:56.440 and others rise a big piece that's coming out about 0:08:56.480 --> 0:09:00.360 Mexico being at a half trillion dollar crossroads. So talk 0:09:00.440 --> 0:09:02.680 us through a little bit how much is at stake 0:09:02.760 --> 0:09:04.559 for Mexico in the next few years. 0:09:04.800 --> 0:09:09.240 Well, as you mentioned, we started by saying or acknowledging 0:09:09.280 --> 0:09:13.240 that Shane Bound has been forced to deal with two 0:09:13.440 --> 0:09:17.559 very strong forces, one external which is dealing with all 0:09:17.600 --> 0:09:23.040 of Trump's immigration, security, and trade policies, and one which 0:09:23.080 --> 0:09:26.080 is domestic, which is Shane bum having to deal with 0:09:26.360 --> 0:09:29.440 Amulo's legacy and am lost legacy has to do with 0:09:29.640 --> 0:09:31.480 his social programs. 0:09:30.960 --> 0:09:34.160 As a previous the previous president Lorador, who is known as. 0:09:34.080 --> 0:09:37.520 That correct so she has had to deal with what 0:09:37.600 --> 0:09:42.440 he left, which were big social programs and state centric 0:09:42.520 --> 0:09:46.920 economy and a couple of reforms that have concentrated power 0:09:47.120 --> 0:09:51.520 in the executive branch and taking out away some power 0:09:51.720 --> 0:09:56.560 from both Congress and more recently the judiciary power. The 0:09:56.640 --> 0:10:00.920 exercise that we did was look at different scenario about 0:10:01.200 --> 0:10:05.319 where with the Mexican economy would be five years from 0:10:05.400 --> 0:10:11.400 now under different assumptions. One assumption would be a positive 0:10:11.559 --> 0:10:14.520 scenario that would be an a scenario in which Mexico 0:10:14.679 --> 0:10:19.240 manages to avoid higher tariffs on its exports to the 0:10:19.400 --> 0:10:25.600 US and in which President Shambaum implements economic policies that 0:10:25.679 --> 0:10:29.679 are more market friendly than those implemented by her predecessor, 0:10:30.040 --> 0:10:33.880 President Lopez o Dador. And a negative scenario in which 0:10:34.760 --> 0:10:39.160 Mexico ends up with tariffs that are in line with 0:10:39.360 --> 0:10:43.520 those with the reciprocal tariff in post on other countries, 0:10:43.559 --> 0:10:46.920 so that's an reciprocal tariff on ten percent on top 0:10:46.960 --> 0:10:50.640 of the twenty five percent Sentennil related tariff, and in 0:10:50.679 --> 0:10:55.960 which President Shambaum implements domestic economic policies in line with 0:10:56.080 --> 0:11:00.360 those that were implemented during the term of Lopezo or 0:11:00.480 --> 0:11:03.520 in power. And the results that we found is that 0:11:03.760 --> 0:11:06.559 assuming that an average economic growth in the US of 0:11:06.640 --> 0:11:10.240 around two percent over the next five years, Mexico would 0:11:10.240 --> 0:11:13.080 grow by an average two point two percent every year, 0:11:13.240 --> 0:11:17.000 so slightly above US growth that by the end of 0:11:17.040 --> 0:11:20.640 that five year forecast period would imply that Mexico's GDP 0:11:20.720 --> 0:11:24.400 would be roughly four point eight, almost five percentage points 0:11:24.480 --> 0:11:27.640 higher than in their status school a scenario. On the 0:11:27.679 --> 0:11:32.679 other hand, if Mexico winds up with reciprocal tariffs and 0:11:33.240 --> 0:11:37.960 economic policies that are fairly rated as market and friendly, 0:11:38.080 --> 0:11:41.400 then average economic growth over this five year period could 0:11:41.400 --> 0:11:45.520 be close to zero, and Mexico's economy by the year 0:11:45.559 --> 0:11:49.080 of twenty and thirty would be almost six percentage points 0:11:49.160 --> 0:11:50.599 lower than otherwise. 0:11:51.000 --> 0:11:53.559 Basically, it's a choice between going up and going down 0:11:53.880 --> 0:11:56.599 in a very sophisticated economic way, and the difference in 0:11:56.679 --> 0:12:00.680 terms of additional growth is half a trillion dollars we 0:12:00.720 --> 0:12:02.920 should say, I mean, so, although she's managed to avoid 0:12:02.920 --> 0:12:06.000 the headlines, we do still have this uncertainty hanging over 0:12:06.440 --> 0:12:10.440 the economy thanks to these sort of continual reprieves, but 0:12:10.559 --> 0:12:13.040 also the times where the president decides to talk tough. 0:12:13.120 --> 0:12:16.800 If he's still talking about these blanket tariffs, that uncertainty 0:12:17.960 --> 0:12:21.120 must be pretty corrosive for the economy right now. Can't 0:12:21.160 --> 0:12:22.600 carry on in definitely. 0:12:22.240 --> 0:12:25.520 Like this absolutely, And actually when you look at the 0:12:25.559 --> 0:12:30.200 figures for economic activity and the exports so far this year, 0:12:31.080 --> 0:12:34.280 when people think about tariffs, they always think about what 0:12:34.440 --> 0:12:38.040 will happen with trade and exports. When you look at 0:12:38.040 --> 0:12:41.920 the exports numbers so far this year for Mexico, they 0:12:42.000 --> 0:12:47.079 show that despite tariffs the fantany related tariffs imposed by 0:12:47.080 --> 0:12:51.160 the US administration, exports to the US are still growing 0:12:51.280 --> 0:12:54.400 and are still growing at a healthy pace. I would 0:12:54.440 --> 0:12:59.560 say the real big negative impact so far on the 0:12:59.640 --> 0:13:04.640 Mexican economy from tariffs has been on the investment side, 0:13:04.679 --> 0:13:07.800 and that is actually exactly in line with the point 0:13:07.840 --> 0:13:11.440 that you are making, and is the drag from this 0:13:11.760 --> 0:13:16.400 uncertainty about what will happen with trade and tariffs in 0:13:16.440 --> 0:13:20.160 the future, and how that has forced a lot of 0:13:20.240 --> 0:13:23.800 companies that had investment plans in Mexico to put those 0:13:23.840 --> 0:13:27.920 on hold. And there's a lot of companies with projects 0:13:28.400 --> 0:13:31.960 that they are ready to start deploying that have decided 0:13:32.000 --> 0:13:35.559 to just wait and see until they have real clarity 0:13:35.600 --> 0:13:39.120 about what is going to happen in the bilateral relations 0:13:39.200 --> 0:13:44.320 and bilateral trade between the two governments and. 0:13:54.200 --> 0:13:58.040 Felipe. If you just look at the way things have 0:13:58.160 --> 0:14:01.839 gone this year and the way that President Chinbaum has 0:14:01.880 --> 0:14:05.480 managed to navigate this so far, would you say the 0:14:05.520 --> 0:14:08.600 friend shoring model was still alive and you wouldn't count 0:14:08.600 --> 0:14:11.720 it out just on the basis of what actually happened 0:14:11.720 --> 0:14:14.480 this year, as opposed to just the rhetoric of Donald Trump. 0:14:14.600 --> 0:14:17.280 Yeah, I would say that there's a big pipeline of 0:14:17.400 --> 0:14:21.560 investment projects, a lot of them that were born under 0:14:21.680 --> 0:14:25.440 the mere shoring boom and all of the expectations about 0:14:25.440 --> 0:14:28.840 how Mexico could benefit from these There's a lot of 0:14:28.880 --> 0:14:32.480 these projects that are now on hold. I would say 0:14:32.880 --> 0:14:35.880 that they are still on hold. They have not been 0:14:36.120 --> 0:14:41.640 completely ruled out. And basically what many of the companies 0:14:41.640 --> 0:14:44.320 that have these projects are waiting is for some clarity 0:14:44.840 --> 0:14:47.440 regarding what is going to happen going forward in the 0:14:47.480 --> 0:14:50.880 bilateral relations between Mexico and the US. As soon as 0:14:50.960 --> 0:14:53.880 they have some clarity about that, they will make a 0:14:53.920 --> 0:14:57.280 decision if they want to go ahead with these projects 0:14:57.400 --> 0:15:00.000 or not. And I would say that going to ahea 0:15:00.080 --> 0:15:04.120 head with these projects doesn't necessarily imply that Mexico will 0:15:04.120 --> 0:15:08.440 not face some tariffs on their exports to the US. 0:15:09.120 --> 0:15:11.800 There's a lot of projects that as long as Mexico 0:15:11.960 --> 0:15:16.240 has more attractive tariffs than the rest of the world, 0:15:16.360 --> 0:15:21.200 including Canada, will imply that maybe Mexico will end up 0:15:21.240 --> 0:15:24.840 seeing the influence and the investment flows tied to those 0:15:24.920 --> 0:15:28.960 projects as long, of course, as those tariffs also leave 0:15:29.080 --> 0:15:32.480 Mexico in a position where it makes more sense for 0:15:32.520 --> 0:15:35.760 the companies to invest in Mexico than in the US. 0:15:36.240 --> 0:15:41.440 But given the differences in costs mainly labor costs, but 0:15:41.640 --> 0:15:45.080 other costs as well, these are some projects that I 0:15:45.120 --> 0:15:48.680 would say are still viable even with some tariffs in place, 0:15:49.240 --> 0:15:51.960 which I think it's likely to be the final outcome 0:15:52.000 --> 0:15:55.080 of all of these. But to answer your question, it 0:15:55.240 --> 0:15:58.760 means that, yes, Mexico is in a position where a 0:15:58.800 --> 0:16:02.200 lot of these near shoring projects would still be developed. 0:16:02.640 --> 0:16:05.720 Alex I'm interested in how this is going down with 0:16:05.960 --> 0:16:10.200 the Mexican public because President Scheinbam's got another five five 0:16:10.200 --> 0:16:14.320 more years, so she's got a while. But you started 0:16:14.360 --> 0:16:18.040 the podcast by saying she's given the president everything he wants. 0:16:18.120 --> 0:16:21.280 Is there a perception that she's played this well or 0:16:21.320 --> 0:16:24.040 that has been to quiet and meek with regard to 0:16:24.080 --> 0:16:26.239 the president house her popularity. 0:16:26.560 --> 0:16:30.160 She's entering her second year and she remains highly popular. 0:16:30.520 --> 0:16:35.680 She has more than seventy percent of approval ratings. Sometimes, 0:16:35.840 --> 0:16:40.280 according to some pools, around eighty percent of appro rating it's. 0:16:40.280 --> 0:16:43.320 Quite a lot more popular than President Trump or In 0:16:43.480 --> 0:16:45.080 or indeed most other leaders. 0:16:46.040 --> 0:16:48.640 Yeah, even then Lopezo with at all, which is crazy, right. 0:16:49.120 --> 0:16:52.840 So I guess she has managed to have two speeches. 0:16:53.160 --> 0:16:57.880 One for the US public, the economy is the politicians, 0:16:58.640 --> 0:17:03.080 where she's discussing these tray issues. She's pretty much recognizing 0:17:03.160 --> 0:17:06.520 that she has to have a good relationship with Trump, 0:17:07.080 --> 0:17:10.720 But she also has another speech for the base that's 0:17:10.760 --> 0:17:14.560 pretty much Mexico is a sovereign country. The US will 0:17:14.600 --> 0:17:19.680 never enter Mexico to try to dismantle fentany or laboratories, 0:17:19.800 --> 0:17:25.800 or to detain drop traffickers or stop migration. She's very careful, 0:17:25.800 --> 0:17:27.919 and we can see that when she's doing like a 0:17:28.040 --> 0:17:31.840 rally in a state around the country. She goes to 0:17:31.920 --> 0:17:34.480 this speech and that goes pretty well with the base. 0:17:34.640 --> 0:17:38.320 I'm not trying to assume that the base don't understand 0:17:38.600 --> 0:17:39.439 what she's doing. 0:17:39.840 --> 0:17:40.280 They do. 0:17:40.800 --> 0:17:43.520 And when you talk to people that tell you she 0:17:43.640 --> 0:17:45.280 has handled from pretty well. 0:17:45.600 --> 0:17:47.640 The pesto is good, the pestot. 0:17:47.440 --> 0:17:50.960 Is stronger, we don't have more tariff. She's raising the 0:17:51.040 --> 0:17:54.320 minimum ways and that kind of stuff. We're getting the pension. 0:17:55.000 --> 0:17:58.240 So people see that. I guess they're happy, and. 0:17:58.280 --> 0:18:01.520 A small philosophical question. It's not a question at all. Ever, 0:18:01.560 --> 0:18:05.679 since NAFTA, which is now more than thirty years ago, 0:18:06.160 --> 0:18:08.720 the country has made a bet on being closer and 0:18:08.760 --> 0:18:11.760 closer to the US, and as you described, alex the 0:18:11.840 --> 0:18:14.840 integration of the supply chains has probably gone further than 0:18:14.880 --> 0:18:18.520 anyone might have expected back in back when that treaty 0:18:18.640 --> 0:18:22.560 was signed. These days we talk a lot about countries 0:18:22.800 --> 0:18:26.520 looking to diversify, being concerned about the US being so 0:18:26.680 --> 0:18:31.000 uncertain on being an unreliable ally these constant threats. He 0:18:31.040 --> 0:18:34.520 seems to be particularly rude, often to his friends. Is 0:18:34.560 --> 0:18:36.920 anyone questioning that? I mean, you would look at Mexico 0:18:37.000 --> 0:18:40.440 and say, wouldn't be so bad to be a bit 0:18:40.480 --> 0:18:43.840 more diversified in your exports, to not be so dependent 0:18:43.920 --> 0:18:47.320 on the US. But is that even an option for Mexico. 0:18:47.760 --> 0:18:51.240 In a normal scenario, this will be an option. But 0:18:51.880 --> 0:18:55.399 we're in a moment that you just cannot upset Trump. 0:18:55.720 --> 0:18:59.119 Mexico is improving a free trade deal with the European Union, 0:19:00.119 --> 0:19:03.439 working on that. They're trying to have more cooperation and 0:19:03.480 --> 0:19:06.600 more trade with Brazil, for example, which is a huge country. 0:19:06.720 --> 0:19:09.119 But they're pretty shy about it. 0:19:09.160 --> 0:19:13.760 Even Canada McCartney has sent to Mexico his main minister 0:19:13.960 --> 0:19:17.920 is trying to reach a better bilateral deal between both 0:19:17.960 --> 0:19:22.640 countries to be stronger for training negotiations. And what has 0:19:22.720 --> 0:19:26.920 been the US response has been like, maybe the USMCA 0:19:27.320 --> 0:19:31.480 negotiation will be bilateral instead of trade lateral, because he 0:19:31.560 --> 0:19:35.080 knows that they're stronger together. So I guess that's one 0:19:35.119 --> 0:19:39.320 of the complicated issues. Everybody knows that Mexico should diversify 0:19:39.359 --> 0:19:43.879 its economy. I think the government is trying. It's being shy, 0:19:43.960 --> 0:19:47.120 but it's trying. But it's hard because if you're sending 0:19:47.200 --> 0:19:50.399 eighty percent of your experts and you're a manufacturing country, 0:19:50.440 --> 0:19:53.280 you cannot upset your northern neighbor. 0:19:53.320 --> 0:19:54.199 If you allow me. 0:19:54.320 --> 0:19:57.439 Adding one more thing about that, and is that yes, 0:19:57.640 --> 0:20:01.480 as Alex mentioned, government officials and people in Mexico would 0:20:01.560 --> 0:20:05.320 like to have a better diversified trade, as you mentioned, 0:20:06.200 --> 0:20:09.680 and as Alex was explaining, it's now probably not the 0:20:09.720 --> 0:20:14.040 best time to do it. And there's like serious worries 0:20:14.119 --> 0:20:17.679 about what would happen to Mexico if you jeopardize at 0:20:17.720 --> 0:20:20.879 all the trade relations with the US. And because of 0:20:21.000 --> 0:20:24.959 all of those constraints and concerns. Actually, along with the 0:20:25.000 --> 0:20:29.280 budget for twenty twenty six, the government submitted the proposal 0:20:29.800 --> 0:20:34.800 to impose tariffs on imports from China and other countries 0:20:34.840 --> 0:20:38.120 into Mexico. Countries with which Mexico doesn't have a free 0:20:38.160 --> 0:20:38.960 trade agreement. 0:20:39.480 --> 0:20:41.480 Was that far after US pressure? Do you think? What 0:20:41.920 --> 0:20:43.000 do you think was driving now? 0:20:43.240 --> 0:20:47.040 It's well known that the US, as part of negotiating 0:20:47.040 --> 0:20:51.760 with Mexico, wants to make sure that Mexico implements some 0:20:53.040 --> 0:20:56.480 trade barriers with China in order to make sure that 0:20:56.680 --> 0:20:59.679 China is not used in Mexico and third countries to 0:20:59.720 --> 0:21:03.639 serve convent the tariffs that the US has imposed on China. 0:21:04.280 --> 0:21:07.520 There's a lot of talk and actually some evidence that 0:21:07.640 --> 0:21:12.200 shows that exports from China to Mexico have sharply increased 0:21:12.280 --> 0:21:15.320 in the last couple of years, which coincides with the 0:21:15.400 --> 0:21:20.560 increasing US tariffs on imports from China, and that has 0:21:20.760 --> 0:21:26.760 all inspired or points to some triangulation of exports from 0:21:26.880 --> 0:21:29.720 China through Mexico that finally end up in the US 0:21:29.760 --> 0:21:32.520 to avoid US tariffs. The US is aware of these 0:21:32.680 --> 0:21:36.280 and has asked to Mexico to take steps in order 0:21:36.320 --> 0:21:40.320 to prevent these and the initiative for Mexico to impose 0:21:40.400 --> 0:21:43.760 tariffs on their imports from China is pretty much aligned 0:21:43.760 --> 0:21:47.359 with that. I think is part of Mexico's attempt to 0:21:48.200 --> 0:21:51.280 have something to show to the US about their willingness 0:21:51.400 --> 0:21:57.760 to cooperate and their hope that with steps like those, 0:21:58.040 --> 0:22:00.320 they are showing the commitment that they have to have a 0:22:00.520 --> 0:22:03.600 lateral relationship with the US, and then they are willing 0:22:03.640 --> 0:22:07.240 to compromise in order to secure that the free trade 0:22:07.240 --> 0:22:10.000 agreement with next with the US will remain in place 0:22:10.119 --> 0:22:12.520 once it's reviewed next year. 0:22:13.320 --> 0:22:16.080 And I'm glad philipp mentioned that, if I may it, 0:22:16.200 --> 0:22:20.840 because she sent this proposal to Congress. We're talking about 0:22:21.359 --> 0:22:28.200 like more than a thousand categories of products, including steel, toys, textiles, shoes, 0:22:28.880 --> 0:22:31.159 you name it. We have a lot of stuff, but 0:22:31.320 --> 0:22:34.520 this you would expect that Congress would pass it like 0:22:34.680 --> 0:22:37.639 right away because they have the majority. They decided to 0:22:37.720 --> 0:22:42.159 delay the discussion, and I've been talking to several lawmakers 0:22:42.160 --> 0:22:44.480 from the ruling party, and I guess this is when 0:22:44.640 --> 0:22:48.560 you know these old school groups from Lopezo re Alora, 0:22:49.280 --> 0:22:54.240 they're not that happy to raising tariffs on China because 0:22:54.240 --> 0:22:55.879 they want to have a good relationship. 0:22:55.880 --> 0:22:57.240 You CUsing off your options. 0:22:57.320 --> 0:22:59.400 Yeah, that's right, and they want to keep a good 0:22:59.440 --> 0:23:03.960 relationship China. So this is a perfect example that maybe 0:23:04.000 --> 0:23:08.119 she doesn't have a strong real opposition, but within the party, 0:23:08.560 --> 0:23:11.359 she's not breed to do whatever she wants. So they're 0:23:11.359 --> 0:23:14.199 discussing this, trying to move the numbers a little bit. 0:23:14.280 --> 0:23:19.040 So this doesn't look too bad for China. Still pleases 0:23:19.080 --> 0:23:20.960 strump So that's the balance. 0:23:21.000 --> 0:23:24.120 Both of you. Just very quickly, if people who are 0:23:24.119 --> 0:23:28.720 not tuning in to Mexico very often, maybe occasionally see 0:23:28.760 --> 0:23:32.840 President Scheinbaum come in a viral clip when she's talking 0:23:32.880 --> 0:23:35.600 about the Gulf of Mexico versus the Gulf of America. 0:23:36.000 --> 0:23:38.840 Are their potential flash points in the next few months 0:23:38.840 --> 0:23:40.840 that we should look at, because we've talked about a 0:23:40.960 --> 0:23:43.600 very narrow line that she has to walk between some 0:23:43.640 --> 0:23:46.639 of this kind of internal opposition, not very much, but 0:23:46.720 --> 0:23:53.240 some concern and instincts versus the pressure from the US 0:23:53.280 --> 0:23:56.959 and the vital importance of that trading relationship. What are 0:23:56.960 --> 0:23:59.360 the things to watch out for over the next few 0:23:59.400 --> 0:24:01.159 months to know how this is going to go. 0:24:02.200 --> 0:24:05.080 I would pay attention to two things, or basically one 0:24:05.560 --> 0:24:09.960 acknowledging that the external front is very important. But on 0:24:10.000 --> 0:24:15.120 that front, the final decision really or I would say 0:24:16.040 --> 0:24:19.040 seventy five percent of the decision or the outcome on 0:24:19.119 --> 0:24:22.480 that front is not under shame Baum's control, but on 0:24:22.520 --> 0:24:25.320 the White House and President Trump. So yes, keep an 0:24:25.359 --> 0:24:28.400 eye on that, but be aware that Trump is still 0:24:28.400 --> 0:24:31.560 probably the one that will decide the end result of that, 0:24:31.960 --> 0:24:35.200 with some input from Shameebaum, and of course a lot 0:24:35.400 --> 0:24:38.440 based on how Shaanebaum deals with Trump, which until now 0:24:38.440 --> 0:24:41.199 she has done fairly well, and therefore I would assume 0:24:41.200 --> 0:24:43.240