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— This is the script of CNBC's news report for China's CCTV on June 06, 2019, Wednesday.
The talks between the United States and Mexico were expected to be a "silver lining" yesterday, but after the U.S. trading session, the situation became "more promising, full of uncertainty. In the latest news, a U.S. government official told NBC that the United States and Mexico failed to reach an agreement on tariffs and immigration during high-level talks Wednesday, U.S. time. One of the main differences in the talks was Mexico's rejection of the idea of making Mexico a "safe third country.
Under the "safe third country" scheme, asylum-seekers must apply for asylum in the first safe country they arrive in. That means that if Mexico agrees to become a "safe third country," migrants traveling through Mexico to the United States must first apply for asylum in Mexico. That means Mexico may need to accept all central American migrants seeking asylum in the United States. Later, Trump said on twitter that progress in the Us-Mexico talks had not been enough and that the two sides would resume talks on Thursday. If no deal can be reached, a 5% tariff could be imposed starting next Monday, and the higher the tariff, the more companies will return to the United States!
While there is strong opposition in congress to the US-Mexico talks, the latest data could strengthen Trump's bargaining chip, more than 130,000 illegal immigrants were arrested at the U.S. border with Mexico in May, the highest monthly number in 13 years, according to data released by the U.S. customs and border protection on Tuesday, adding to the growing support for immigration reform in the United States. A recent poll showed 46 per cent of Americans support Trump's plan to impose tariffs on Mexican imports to combat illegal immigration, up from 40 per cent who disapprove.
For outside investors and analysts, the sudden uncertainty in the outlook for the talks has widened the fall in the Mexican peso against the dollar, making the global trade friction severe.
President and Chief Operating Officer of The Goldman Sachs Group
Mexico has to worry, you are seeing the US admins is increasingly using tariffs as a tool in the toolbox to firm their objectives, you know, from a policy standpoint in a number of barriers , and Mexico obviously does enormous amount of trades with the unites states, they have the USMCA,trade agreement kind of before congress right now, so it is off-putting, i think, for number of people in united states to think about how it is going play forward and it is clearly add more fuel to the fire in the overall trade dialogue
Goldman's expectation is that a 5 per cent tariff is essentially a done deal, given the very near date when the US plans to impose tariffs on Mexico. And if the tariff goes into effect then there is less likely that the new USMCA can get approval before the US general election next year.
Because that would trigger a slowdown in consideration of the deal by democratic leaders in congress, Mexico, angered by the tariffs, may also slow its approval process. Fitch Ratings forecasts that if tariff go into effect, then it could affect a fifth of Mexican businesses, and Mexican exports to the United States totaled $347 billion last year.
As a result, Fitch cut Mexico's rating to BBB from BBB+ after the overnight close, citing uncertainty over the outlook for the country. Moody's, a rating agency, cut its outlook from stable to negative, though not directly downgrade it, but that means a possible downgrade in the future. And markets are now paying close attention to the outcome of Thursday's talks. We will keep an eye on this issue.