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Hello there from Washington, where Democratic and Republican lawmakers on Capitol Hill have struck a $2tn stimulus deal to provide a boost for US businesses and shore up the sliding economy. It stands to be the largest congressional bailout in US history. From the capital to the border, where we take a look at how bad border closures between the US, Canada and Mexico are, while the Person in the News is top EU Brexit negotiator Michel Barnier.
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Businesses cast uneasy eye as goods move between the countries
Throughout his presidency, Donald Trump has not shown much love for Mexico. But on Saturday he and his counterpart, Andrés Manuel López Obrador, agreed to work to keep trade and cargo flowing across the border even as they mostly shut it down.
The spread of coronavirus has prompted extraordinary measures across the world, including the sort of border closures that would have been unthinkable only six months ago. The US has now partially shut the borders with its two neighbouring countries, allowing cargo and workers to pass, but halting the flow of all other travel, including migrants and asylum seekers, in a bid to stop coronavirus.
There is no doubt that closing the Mexican and Canadian borders to trade would cause economic damage. Put simply, the US sent more than $256bn of goods to Mexico — its second-largest export market — in 2019, according to figures from the US Census Bureau. It imports more than $358bn of goods. The US imports more only from China than it does from Mexico.
Trade with Canada follows a similar pattern: Canada is the US’s biggest export market, with nearly $293bn worth of goods sent north of the US border in 2019, while imports totalled nearly $320bn.
Business groups, therefore, breathed a sigh of relief when the Trump administration did not announce a full closure of the border. But people are still not entirely relaxed. While co-operation between Canada and the US has remained relatively smooth, even in the age of Trump, the same cannot be said for the US and Mexico, leaving trade watchers and business lobbyists uneasy.
Trump started his premiership by threatening to build a border wall and graduated to tightening immigration rules and cutting foreign aid. He declared a state of national emergency on the Mexican border last winter after having failed to secure funding for a wall from Congress, and shortly afterwards threatened to impose tariffs as high as 25 per cent on imports from its southern neighbour if it failed to control immigration.
The Trump administration at the time insisted that the tariffs were intended only to encourage Mexico to control the flow of migrants into the US. But on Twitter, Trump suggested US companies manufacturing in Mexico should return their factories to the US if they didn’t like the tariffs, characterising Mexico as having “taken” about a third of the US’s auto industry.
When Trump’s impulse to bring supply chains back to the US is taken together with an animosity towards Mexican immigrants and asylum seekers, it is easy to see why businesses are wary of the administration watching its southern border closely.
Edward Alden, of Washington think-tank CFR, points out that the relatively weak diplomatic co-operation between the US and Mexico could be an issue when it comes to controlling the cross-border spread of coronavirus. “I’m worried that the Mexicans are not taking this as seriously, that there’ll be an outbreak, and that this is a US administration constantly looking to close the border,” he said.
It’s not all about goods, but people too: banning the flow of people across borders is not without cost. The Mexico frontier has been closed for a little over 72 hours, depriving several integrated border towns of workers and customers. The US Chamber of Commerce says it’s in contact with Canadian, Mexican and US officials daily while it watches the situation unfold.
Early anecdotal reports are outlining the hit to businesses that a halt to cross-border commerce can bring. The Texas Tribune reports on the plunge in revenue facing shops in the border town of El Paso, while the San Diego Union-Tribune has written about similar problems facing small business owners in California.
Shop owners in San Diego were given a taste of what losing Mexican customers looks like when US officials closed the nearby crossing point of San Ysidro in November in response to migrants rushing the border. Although the closure lasted only a few hours, it came on one of the busiest shopping days of the year. Local retailers estimated they lost $5.3m in sales.
A full border closure would be far more catastrophic. But as coronavirus, which knows no borders, spreads, even close trading partners will have to rethink their relationships.
Across Europe, difficult negotiations are under way between governments, employers, trade unions and workers — and hard-pressed doctors who generally favour the tightest lockdown possible to reduce pressure on hospitals. One of the fiercest debates is in Sweden, where business people, scientists and newspaper columnists are arguing over whether the measures taken to counter the virus are worth the economic damage they cause. Read more
Person in the news
Michel Barnier, the EU’s chief Brexit negotiator
Why is he in the news?
Barnier tested positive for coronavirus, becoming the first senior Brussels policymaker to confirm they have Covid-19.
The virus makes trade negotiations between the UK and EU difficult, while the overwhelming nature of the pandemic has made trade negotiations less of a priority for governments.
The US signed off on a $2tn aid package in the early hours of Wednesday and the global bailout — central bank liquidity support included — will have a sticker price of more than $4.5tn, writes Jonathan Guthrie. That is a big number, even by the standards of recommended takeovers. And have no doubt that this is a takeover.
It will be impossible to close large parts of our economies for very long, writes Martin Wolf. If suppression is to be tried, it must be successful quickly and resurgence of the virus must be throttled.
It’s not just grocery shoppers who are hoarding pantry staples. Some governments are moving to secure domestic food supplies during the coronavirus crisis, Bloomberg reports.
The best trade stories from the Nikkei Asian Review
Huawei Technologies is prioritising its base station business while cutting procurement for its smartphone segment, as Chinese President Xi Jinping vows increased spending on crucial infrastructure to help the world’s second-largest economy recover from the impact of coronavirus.
Just a month ago, Danny Lau was concerned that he might miss the deadline for deliveries to a US client, as he was unable to reopen his aluminium facade panel factory in the southern Chinese city of Dongguan due to coronavirus ravaging the country. But now domestic operations are resuming just as the disease hits global demand.