Trump asserts protectionist agenda in inaugural speech

With profound ramifications for the Mexican economy, fierce protectionist and populist billionaire Donald Trump assumed the US presidency Friday with his earliest moves to redefine trade policy now eagerly awaited.

"We will follow two simple rules: Buy American and hire American," said the new leader in his inaugural address, trumpeting a clarion call for potentially radical changes that hark to his campaign promises to renegotiate or scrap Nafta, move manufacturing out of Mexico and deport undocumented workers back to Mexico.

"We will bring back our jobs. We will bring back our borders. We will bring back our wealth. We will bring back our dreams," said Trump.

Trump was ushered into power on a wave of populist resentment over low-paying jobs, illegal immigration and frustration with status-quo politicians, and in his address Friday he clearly played to his electorate's perception of the US as a victim of global trade.

"The wealth of our middle class has been ripped from their homes and then redistributed across the entire world. But that is the past," he said.

His installation presents an immensely complex challenge for Mexico, already straddled by its own economic and political woes, including worrisome public debt, faltering oil industry and popular outrage against President Enrique Peña Nieto's administration.

US automaker Ford's announcement earlier in the month that it was scrapping plans for a US$1.6bn car plant in Mexico following Trump criticism helped spark a 6% slide in the peso, as domestic issues were hit by fears of further losses in foreign direct investment and fueled by Trump tweets threatening a massive 35% tax against firms like Toyota, BMW and GM if they did not refocus manufacturing investment back to the US.

On the campaign trail, Trump characterized Nafta as "the worst trade deal ever" and has since repeatedly called for its renegotiation or even its repeal, making the North American Free Trade Agreement a 'Day One' policy issue.

Mexico has already announced it will be sending a trade delegation of high-ranking officials to meet with the Trump administration January 25 and 26.

The nation is moving quickly to head off an impasse on the 24-year-old trade treaty, having itself on various occasions called for changes to the aging document that address major concerns left unclear or poorly designed in the treaty, including labor and environmental issues.

Trump's position has and continues to be that the US needs to see the massive return of manufacturing jobs, drawing broad criticism from opponents who would counter that the manufacturing sector has undergone decades of globalization and automation since the heyday of US manufacturing in the mid-20^th century and is no longer where the future of high-paying jobs in the country lies.

"We've made other countries rich while the wealth, strength and confidence of our country has disappeared over the horizon," Trump said on the US Capitol steps.

From 1993 to 2015, trade between the three members of Nafta – the other being Canada – quadrupled from US$297bn per year to US$1.14tn, lowering prices for consumers, creating new jobs and making supply chains possible across borders. In that time, according to official figures, US exports of goods to Nafta signatories rose to US$517bn/year from US$142bn in 1993 – and now accounts for a third of its total global exports.

While it has gone on to create an estimated 5mn US jobs, Nafta is also blamed for the loss of some 682,900 US manufacturing positions, most coming in the first few years of the agreement.

While the US remains a signatory to Nafta and the WTO, Trump will have to navigate around treaty rules to accomplish his goals, and that may come in the form of a proposal from Republican house leader Paul Ryan to remove taxes on export sales and place a 20% tax on all items imported into the US.

Such a system could easily generate within a handful of years enough revenue from taxes on imported goods from Mexico to build Trump's border wall, beef up border security and round up millions of undocumented workers, thus enabling Trump to carry out his message of making Mexico "pay for the wall."

"Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength," the new US president said.