Trump's use of tariffs could get 'out of control,' former US diplomat says - CNBC

U.S. President Donald Trump's latest threats to slap tariffs on Mexico may cause relations between the two neighbors to spiral "out of control," a former U.S. diplomat said on Tuesday.

Bruce Heyman — who served as U.S. ambassador to Canada from 2014 to 2017 — said that if Trump makes good on his threat and tariffs are implemented on June 10, "the Mexicans are going to respond just like the Chinese have done, just like the Canadians have done. "

It could lead to a "tit-for-tat" trade escalation between the U.S. and Mexico, and "get out of control," Heyman told CNBC's "Squawk Box Asia. "

On Thursday, Trump took to Twitter to announce that a 5% tariff will be slapped on all Mexican imports starting June 10. That decision sparked fears that a trade war could open on another front, and stock markets around the world tumbled on that news.

In a White House statement, the president said the levies were in response to the "severe and dangerous consequences" of the "illegal migration crisis."

U.S. President Donald Trump delivers a televised address to the nation on funding for a border wall from the Oval Office of the White House in Washington DC on January 8, 2019.

Saul Loeb | AFP | Getty Images

According to Heyman, Trump has been using "old pieces of legislation that give authorities to the president in terms of various forms of national emergencies."

"All the previous times we've used tariffs have been trade issues. He's now weaponized the tariffs to use them for other things other than trade. Now it's immigration," he added. "Who knows what's next?"

'Real setback' for USMCA

Trump's tariff threats on Mexico came just as the process to ratify the United States-Mexico-Canada Agreement had just begun. The USMCA is a three-country trade deal that's an updated version of the North American Free Trade Agreement.

According to Heyman, Trump's actions were a "real setback" to the ratification process of the USMCA.

"I would say, 10 days ago, I think we were on the path of moving ahead with USMCA," Heyman said. "But toward the end of the week, two things happened: one, as you said, the Mexican tariffs were imposed."

"And the second was, the administration has moved to move ahead with the legislation on USMCA without actually having resolved the language issues that the Democrats want fixed," he added.

The trust factor is very low, between Congress and the President, and between our allies and the president right now.

Bruce Heyman

Former U.S. ambassador to Canada

Both actions from the Trump administration were "aggressive" moves, and will "definitely ... impact this approval process," according to Heyman.

That said, however, Heyman observed that Trump has "left himself a lot of room" by not imposing any standards for what Mexico needed to do in order to be exempted from tariffs.

Low trust level

Still, Trump's unpredictability has made it "very hard" for Mexico and Canada to reach a trade agreement with Washington, according to Heyman.

"The Canadians and Mexicans have told me today, 'How do you trust somebody if you reach an agreement the week before to move ahead, and all of a sudden they find some other avenue to put tariffs on you?'" Heyman said.

"The trust factor is very low, between Congress and the President, and between our allies and the president right now," he added.

Asked what to expect next on the trade front, Heyman said he did not know but was "hopeful" that these tensions would be resolved soon.

"We've been talking about it here on the station this morning that the economy around the world is much more fragile than people realize," Heyman said. "And I think these tariffs are having an impact globally, and sometimes they'll have an unintended consequence if he (Trump) continues to do this."

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