Trump’s threatened imposition of tariffs on Mexican goods has key context.
In 1938, Mexico nationalized its oil industry, prompting foreign firms to howl in protest and the U.S. and other countries to slap the country with an economic boycott.
That punishment resulted in a 50% decline in Mexican oil exports. This loss of export revenue caused severe financial strain on the country, including a devaluation of the Mexican peso and an immediate 20% increase in prices for the Mexican population.
Additionally, Mexico faced difficulties accessing foreign markets for its oil and acquiring energy equipment and technology from abroad. This forced the newly established state-owned company, PEMEX, to rely solely on domestic resources for its operations.
The financial impact of the boycott extended beyond immediate losses, as it took eight years for Mexico’s oil production to recover to pre-nationalization levels, and government revenues from petroleum did not return to prior levels for nine years.
In 1942, the neighbors settled on the amount of compensation to be paid to American companies–$29 million–and the embargo was lifted.
President Roosevelt pressed hard for the accord in part because Nazi Germany had become a major customer for Mexican oil.
The takeaway is that Mexico and the United States relied on real world diplomacy to fix a nettlesome problem. Today’s threatened tariffs are a regression into bullying mode.
Ricardo Chavira Chicano 