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How Trump's trade tariff tweet put Mexico's back to the wall

[May 31, 2019] By Noe Torres and Anthony Esposito

MEXICO CITY (Reuters) - It should have been a good day for Mexico's veteran point man for trade with the rest of North America.

But Jesus Seade had just wrapped up an optimistic speech to a friendly Mexican Senate, aimed at winning ratification for a regional free trade deal, when he was sideswiped.

At 6:30 p.m. (2330 GMT), U.S. President Donald Trump tweeted that Washington would impose a 5% tariff, rapidly ratcheting higher, on all goods coming from Mexico unless the flow of illegal immigrants across the southern U.S. border was stanched.

The message reached Seade, Mexico's deputy foreign minister for North America, just as he arrived from the Senate at the Foreign Ministry to tell reporters about the progress on the United States-Mexico-Canada-Agreement (USMCA) he helped negotiate.

At first, he tried to play down the development, saying "Trump is very active in the use of the tweet," of which only some are "put into action."

Then Seade's demeanor became more serious.

"My colleagues just told me that the tweet mentioned by the last journalist, bad news. It's no longer just a tweet, it's now a White House statement," he said.

Clearly taken aback by the severity and abruptness of the measures, which would take tariffs to 25% by October, Seade swung from advising calm and dialogue to saying a strategy of non-retaliation from President Andres Manuel Lopez Obrador would be unacceptable.

Mexico sends about 80 percent of its exports - mostly manufactured goods like cars and televisions - to the United States.

Seade said the most logical response to would be an "eye for an eye" but then warned reciprocal measures would lead to a trade war "and that is the last thing that we want."

A gregarious and immensely experienced negotiator, Seade has invested a lot of time in keeping bilateral relations on an even keel.

He helped create the predecessor to the World Trade Association and used an old connection with U.S. Trade Representative Robert Lighthizer to seal the new USMCA over meals at the Metropolitan Club in Washington.

But even before the tariff threat, there were still hurdles to cross.

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Mexico's Deputy Foreign Minister for North America, Jesus Sead reacts during the delivery of the United States-Mexico-Canada Agreement (USMCA) deal, at the Senate building in Mexico City, Mexico May 30, 2019. REUTERS/Henry Romero

Democrats in the U.S. House of Representatives, perhaps wary of handing Trump a victory and worried the deal is not still not tough enough on labor law enforcement, have indicated they may not approve it.

But U.S. Vice President Mike Pence said on Thursday he was pushing to get the U.S. Congress to ratify it this summer, after both Canada and Mexico signaled they were ready.

Hours later, nearly 20 months of talks, concessions, and wrangling to seal the replacement for the North American Free Trade Agreement (NAFTA) seemed to be slipping away.

"This is difficult ... even more so between two nations trying to seal a wonderful trade deal. The best trade deal in history according to Trump himself and suddenly he throws this in the way," Seade said.

On Friday a delegation led by Foreign Minister Marcelo Ebrard, which an aide said might include Seade, will travel to Washington to try to defuse the situation before economic disaster strikes.

Mexico imports a great deal of U.S. products, giving it scope for a large-scale retaliation.

"If we consider that Mexico exports over $350 billion to the United States, retaliation to the measures by Mexico would be off the charts," said Kenneth Smith, Mexico's former chief NAFTA negotiator.

Mexico's reaction is not yet clear.

In a letter to Trump, Lopez Obrador said he was not looking for confrontation but also jabbed back, calling the U.S. leader's signature phrase America First "a fallacy."

(Writing by Anthony Esposito; Editing by Frank Jack Daniel and John Stonestreet)

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