Saving Emerging Markets From Trump
US President Donald Trump has managed to sow doubts about the entire framework of global trade and economic openness. Mexico, like other emerging economies, is right to bemoan Trump's agenda; but there are still measures its government can take to improve growth.
MEXICO CITY – It is easy to sympathize with Mexico now that US President Donald Trump has turned that country into a political piñata. If Trump gets his way, Mexico’s northern border will feature a “big, beautiful wall,” and the North American Free Trade Agreement, which is crucial to Mexico’s economy, will be renegotiated to satisfy an “America first” agenda. And if that were not enough, Mexican capital and currency markets will bear the brunt of the pain from unstable US monetary and fiscal policy.
But Mexico is not alone, and its experience is relevant for all emerging economies, because Trump has called into question the entire framework of global trade and openness. In fact, judging by Trump’s performance at the recent G7 summit in Sicily, we can expect to see him continue his attack on globalization at the G20 summit in Hamburg this week.
Few countries have embraced globalization more wholeheartedly than Mexico, which is now one of the most open economies in the world. Emerging economies in general have pursued export-led growth strategies similar to that of the Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan). But Mexico has gone further, by embracing manufacturing as a way to diversify its economy away from oil extraction.