White House looks to minimize economic impact of Trump’s border shutdown threat
Senior White House officials are exploring ways to exempt commercial trade from President Trump’s threat to shut down the U.S. border with Mexico, three people briefed on the discussions said, amid warnings that blocking the flow of goods between the two countries would have severe consequences for the U.S. economy.
In brief remarks, Trump on Tuesday again threatened to close the border but would not definitively say whether he would do so, and he has not divulged his plans even to some of his closest aides. But the White House is bracing for the possibility and internal planning has reached an advanced stage, according to the three people, who spoke on condition of anonymity because they were not authorized to disclose the deliberations.
Trump plans to visit the Mexico border Friday in California, where some aides are bracing for a possible announcement. Even though White House officials had begun deliberating, business groups expressed skepticism that any plan might work in a way that limited potential problems.
As Trump has escalated his threats to close the border in recent days, top aides have launched a two-pronged strategy in preparation for a decision.
One approach has been to study ways to minimize the economic impact of shutting the border with the United States’ second-largest trading partner, in part by allowing trains and trucks to continue bringing goods across the border.
The second prong has included a series of internal warnings to Trump about what might happen if the border is sealed, messages delivered by National Economic Council director Larry Kudlow and Kevin Hassett, head of Trump’s Council of Economic Advisors.
“We’re watching it and looking for ways to allow the freight passage,” Kudlow said in an interview with CNBC. “Some people call it truck roads. And there are ways you can do that, which would ameliorate the breakdown in supply chains.”
Many U.S. manufacturers rely on the import of parts and equipment from Mexico in order to complete production and ship machinery, cars or other goods.
At the Brownsville, Texas, border crossing last year, nearly 800 trucks crossed the border each day, according to data from the Department of Transportation.
Senate Republicans have also begun sounding alarms about what might happen if Trump follows through on his threat, focusing on the economic effect because that often resonates with Trump.
Senate Majority Leader Mitch McConnell (R-Ky.) has also expressed concerns that shutting down the border would hurt the economy, according to an advisor who requested anonymity to describe private discussions.
“Closing down the border would have a potentially catastrophic economic impact on our country, and I would hope that we would not be doing that sort of thing,” McConnell told reporters Tuesday.
Sen. John Kennedy (R-La.) said shutting down the border could cost the U.S. economy $1 billion or $2 billion each day.
In a possible sign of things to come, a gauge of avocado prices is having its biggest gain in almost a decade as consumers weigh Trump’s latest rhetoric. The Mexico City Hass price from Michoacan, the heartland of Mexican avocado production, jumped 34% on Tuesday. That would be the biggest one-day gain since April 13, 2009.
The increase may reflect growing demand in anticipation of a border shutdown, said Rabobank analyst Roland Fumasi. Mexican avocados account for 75% to 80% of U.S. consumption, and California for about 16%, according to data from the Haas Avocado Board. Chile and Peru supply most of the rest.
Trump’s vow to close the border comes after several tense months in U.S.-Mexico relations. The Mexican government last year agreed to restructure the North American Free Trade Agreement after Trump threatened to rip up the 1994 deal. But the new agreement has bogged down in Congress, in part because Democrats want more assurances on how certain provisions will be enforced.
And Trump earlier this year declared the situation at the Mexico border to be a national emergency, a designation that he has said allows him to redirect taxpayer money to expedite the construction of a wall.
But the recent surge of families and other migrants trying to cross into the U.S. has led Trump to call for even more immediate steps, with his focus in recent days shifting to closing down the border.
The president said on Tuesday that he is more focused on security concerns than the effect closing the border would have on the U.S. economy.
“Sure it’s going to have a negative impact on the economy,” he told reporters, while saying it was possible that only certain sections of the border could be closed. “Security is more important to me than trade.”
Trump has also been told by some advisors that it would be extremely difficult to operationally shut down the border, but he has told them to move forward with looking at ways to achieve the feat.
As of Tuesday afternoon, U.S. Customs and Border Protection officials had not been instructed to prepare for the possibility of shutting down the border, according to a Department of Homeland Security official who spoke on condition of anonymity to describe internal deliberations. Department of Homeland Security Secretary Kirstjen Nielsen cut short a trip to Europe this week and returned to Washington early Tuesday morning to manage the agency’s response at the border, department officials said.
At least 545 blue-uniformed Customs and Border Protection officers have been redeployed to help Border Patrol agents detain and process Central American families arriving in record numbers. Diverting those officers and other resources away from U.S. ports of entry along the Mexico border is already leading to increased wait times and logjams for commercial trucks and vehicles entering the United States.
Wait times for vehicles trying to cross the border in Brownsville extended to three hours on Monday, a senior Department of Homeland Security official told reporters Tuesday. At the Otay Mesa crossing in San Diego, one of the border’s busiest for cargo, 150 commercial trucks were stuck in line Monday, officials said.
Despite the logistical and economic concerns, White House aides have said this week that Trump is serious about closing the border even if the timing remains unclear.
On Tuesday, White House Press Secretary Sarah Huckabee Sanders softened Trump’s threat to close the southern border by the end of the week, saying that such a move was not the president’s “first choice” and that he does not have a “specific timeline.”
“Eventually it may be the best decision that we close the border,” Sanders told reporters at the White House, adding that Mexico has taken some concrete steps to slow the flow of migrants coming into the United States, as Trump has demanded.
“He’s hoping that Mexico will continue to step up, like we’ve seen them do over the last couple of weeks,” Sanders said. “We hope that that continues, and that we can work with them so we don’t have to [close the border].”
Trump has told advisors that he would close the ports of entry and reallocate the Border Patrol agents to other parts of the country. In Trump’s mind, the closure is about leverage — forcing people to think he’s about to do it, and just might do it, to get other concessions, current and former aides said.
Trump has used a similar approach before with trade negotiations and even in the run-up to the government shutdown last year. Sometimes he backs down at the last moment, and sometimes he follows through.
But the fact that White House officials are looking at ways to address the fallout of his latest threat shows how real the option has become, at least internally.
Completely shutting down the U.S. border with Mexico, as Trump has threatened, could halt all U.S. automotive manufacturing within a week, affecting at least 1 million jobs, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. She said virtually all U.S. auto production relies on some key parts from Mexico or Central America, and these products are brought into the United States on trucks or trains.
“The building of vehicles requires 100% of the parts to be there,” she said, adding that seat belts, engines, transmissions and wiring harnesses are all brought across the U.S. border.
The U.S. Chamber of Commerce began raising alarms last week about Trump’s threat to shut down the border, saying it could have a crippling effect on the U.S. economy. But Trump has so far refused to back down.
Mexico is the U.S.’ second-largest trading partner, meaning that any disruption at the U.S. border could have immediate consequences for the economy. U.S. companies imported $314.3 billion in goods from Mexico in 2017, according to the Office of the U.S. Trade Representative. And U.S. companies exported $243.3 billion in goods.
The top imports from Mexico are automobiles, electrical machinery, medical instruments and mineral fuels. The U.S. also imports more agricultural goods from Mexico compared with any other country, with $11.5 billion in fresh fruit and vegetables brought into the U.S. each year.
Bloomberg contributed to this report.
