The most hostile US administration to Mexican interests in a century has just taken office, and the administration of Enrique Peña Nieto has no contingency plan to deal with the fallout. Trump harbors a grudge against Mexico, for no better reason than that Mexico is a convenient scapegoat for many frustrated members of the working class, angry mainly over the loss of manufacturing jobs and the fear of unfettered illegal immigration. Mexico is ethnically and culturally considerably distinct from the US, which has further triggered a sense that national identity is under assault among those opposed to multiculturalism. Mexico is also astonishingly weak in terms of hard power. With virtually zero capability for deterrence, diplomacy is the country's only defense against Trump's aggression.
Trump harbors a grudge against Mexico, for no better reason than that Mexico is a convenient scapegoat for many frustrated members of the working class.
With this in mind, Mexican policy towards the US in the next four years has two options:
Defiance
The Mexican government knows well that resisting Trump's efforts to weaken years of close economic and political relations is the most politically desirable option and that at best, could forge some national unity at a time when social tension runs high. A recent poll showed Peña Nieto's approval rating at a dismal 12% (the lowest of any Mexican president on record), mostly on account of his government's lax attitude towards the rule of law and human rights, a sluggish economy, and a widely unpopular recent decision to hike gasoline prices by up to one-fifth. Using anti-American sentiment to rally popular support has been a ubiquitous strategy in Latin America, particularly by leftist government such as those in Cuba and Venezuela. Even Andrés Manuel López Obrador, Mexico's perennial left-wing anti-neoliberal crusader, is now an ardent defender of NAFTA, given that domestic opposition to Trump now greatly exceeds opposition to free trade.
However, this strategy runs the risk of inviting more severe reprisals than taxes on cars imported from Mexico or on outflows of remittances sent home by Mexicans working in the US, or even demands that Mexico pay for a border wall. Given what we know of Trump's character and temperament, can a more vicious effort to undermine the Mexican economy be out of the question? And can the intimidation extend to the political level? Perhaps even the threat of military action, something unthinkable since Franklin D. Roosevelt's "Good Neighbor" policy emerged in the 1930s, cannot be fully discounted anymore. If this sounds too far-fetched, it's worth recalling that back in March Trump boasted "when I rejuvenate our military, Mexico is not going to be playing with us with war". Nothing so far suggests his most outlandish threats shouldn't be taken seriously.
Appeasement
No Mexican public figure, much less any of those looking to get elected in 2018, will admit in public that appeasement is a better option even if they believe it in private. But from a purely strategic perspective, it might work. If Mexico bets that Trump will only last four years in office, taking a few punches could be better than risking a knockout blow. Temporary fiscal concessions, for example, could be offered to sectors affected by unilateral US taxes, and under-the-table deals could be brokered with Democrats to ensure that even if Mexico has to pay for the wall in some form or another, that this will be partly or fully paid back in the future once a more sensible administration takes office. Even accepting a remittance tax would not be so calamitous; the recent depreciation of the peso means that every dollar of remittances today is worth over 40% more in peso terms than two years ago.
Of course, there is no guarantee that appeasement would work, or that it would not make Trump bully Mexico even more if he smells weakness. In which case the Peña Nieto government would get the worst of two worlds: a hostile domestic environment coupled with humiliation at the hands of the US. The Mexican political system is remarkably resilient to crises and scandals, but this might be too much to handle for an administration as unpopular as Peña Nieto's.
Is there a third way to deal with Trump?
A more utilitarian approach would be to play along, and attempt to find long-term benefit in short-term pain. The idea that NAFTA is non-negotiable, for example, is economically absurd; there are many restrictions on intellectual property rights, local content rules, and capital controls (just to name a few) that Mexico would benefit enormously from if they were slightly relaxed. There is no reason Mexico cannot put them on the table. Mexico should also accept that a porous border is not in its best interest: it may have little objection to people (and drugs) crossing north, but guns crossing south are a major driver of crime and violence. Mexico can also stop pretending that the US is morally required to take in the illegal immigrants that its own labor market has failed to absorb. It should accept a higher pace of deportations if the US is willing to assist in education, training and reintegration schemes back home. With enough creativity and willingness to accept some responsibility for long-standing policy failures, Mexico can turn what appear to be zero-sum outcomes into at least partial wins.
Peña Nieto and his team would do well in reading Trump's ghostwritten 1987 bestseller, The Art of the Deal, particularly his third strategy for deal-making, maximize your options. In his own words, "I never get too attached to one deal or one approach". Ultimately, Mexico's true powerlessness against Trump doesn't come solely from the inequality in power between the two countries, but also from the Mexican political establishment's inflexibility in adapting (practically and ideologically) to a new global reality. Like natural selection, it will have to learn the hard way or risk its own extinction.
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