Introduction
This article delves into Mexico’s historical responses to significant tariff increases imposed by the United States, contrasting them with earlier challenges posed by presidents Andrew Jackson and Polk. We will explore how Mexico navigated these economic storms, focusing on the strategies employed by leaders like Porfirio Díaz and the role of institutions such as the Banco de México.
Tariff Increases by William McKinley (1890)
In 1890, U.S. Congressman William McKinley, who later became president, pushed for a 48% increase in tariffs on imported goods. This move was politically appealing but economically questionable, as it negatively affected Mexico, which relied heavily on the U.S. market for 70% of its exports, including sugar, henequen, minerals, metals, and livestock.
Under President Porfirio Díaz, Mexico opted for pragmatism rather than confrontation. Díaz negotiated bilateral trade agreements with other countries and established clear rules to attract foreign investment. This strategy enabled Mexico to secure capital and technology for railroad development, mining, and oil extraction.
The Smoot-Hawley Tariff Act (1930)
Four decades later, the Smoot-Hawley Tariff Act of 1930 sparked a global trade war. The U.S. raised import tariffs from 25.7% in 1925 to 47% between 1931 and 1935, a policy cynically termed “empobrecer a tu vecino” (Beggar thy Neighbor). This led to most countries increasing their tariffs, contributing to the Great Depression’s transformation from a stock market crisis into a global economic downturn.
Mexico was not spared from the crisis, with exports shrinking by over 30% between 1929 and 1931, affecting mining, oil, and agriculture. The Mexican peso devalued by nearly 22% from 1931 to 1932. However, Mexico’s response differed from other nations.
Mitigating Factors
- Estrada Doctrine (1930): This policy of non-intervention prevented Mexico from escalating tariffs, maintaining a stable relationship with the U.S.
- Creation of Banco de México (1925): The central bank’s establishment provided liquidity to the banking system during the Great Depression, averting bank failures.
These factors contrast sharply with Mexico’s responses to Jackson and Polk’s challenges, which occurred when the country grappled with internal divisions. A solid institutional framework and pragmatic foreign policy were crucial in mitigating damage from external pressures.
Lessons for Today
The current Mexican government faces a formidable challenge, requiring temperance and collaboration with the U.S. While addressing commercial issues, it must also tackle migration, drug trafficking, security, and societal polarization.
Although we cannot alter the U.S. president’s protectionist and anti-immigration stance, understanding their perspective is vital. Many Americans perceive Mexican governments as untrustworthy in drug war efforts and migration control, or as violating trade agreements by facilitating Chinese goods.
Strategies for the Future
- Flexibility: Embrace flexibility in areas that can strengthen Mexico, such as trade, combating drug trafficking, and migration agreements.
- Reciprocal Agreements: Actively seek mutually beneficial agreements, particularly in drug trafficking and trade, leveraging shared interests with U.S. financial institutions.
- Invest in Essentials: Prioritize health and education to foster sustainable improvement for low-income individuals. A reliable legal framework and robust institutions are essential to attract investment and spur economic growth.
Lord Palmerston’s words from 1847 echo the challenges Mexico still faces: “Los mexicanos deben poner manos a la obra y construir una nación sólida y perdurable… los desórdenes públicos, constituyen el estado habitual de la sociedad mexicana.” It is the collective responsibility of society and government to make this statement obsolete, drawing Mexico and the U.S. closer.
