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Guatemala has pledged a 40% increase in deportation flights carrying Guatemalans and migrants of other nationalities from the United States, President Bernardo Arevalo announced Wednesday during a press conference with US Secretary of State Marco Rubio.
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Guatemala has also agreed to create a task force for border control and protection along the country’s eastern borders. The force, composed of members of the National Police and army, will be tasked with fighting “all forms of transnational crime,” Arevalo said.
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Arevalo also said that Rubio has voiced his support for developing infrastructure projects in the Central American nation. He added that his government would send a delegation to Washington in the coming weeks to negotiate deals for economic investments in Guatemala which he said would incentivize Guatemalans to stay in their home country and not migrate to the US.
Arevalo said Guatemala has not had any discussions about receiving criminals from the US as El Salvador’s president has offered. He also insisted his country has not reached a “safe third country” agreement with the United States, which would require migrants who pass through Guatemala to apply for asylum there rather than continuing to the US.
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Job losses
But what about the impact of tariffs on job creation? Surprisingly, an increase in import taxes has been found to result in slightly more unemployment across countries.
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An example provided by Irwin at Dartmouth College points to one plausible explanation and it has to do with the steeper cost of imported goods.
“A number of studies have shown, on net, we lost jobs from the (2018) steel tariffs rather than gained jobs because there are more people employed in the downstream user industries than in the steel industry itself,” he said.
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A study by the Federal Reserve Board found that a rise in input costs resulting from US tariff hikes in 2018-19 led to job losses in American manufacturing. The damage from those higher expenses was compounded by retaliatory taxes on US exports, more than offsetting a small boost to manufacturing employment from US tariffs at least so far, the 2024 paper said.
Retaliation by other countries is indeed another danger of pulling the tariff lever. Higher tariffs on American exports would typically raise their prices for foreign consumers, hitting demand for the goods in many cases.
When Trump announced new tariffs this year, America’s major trading partners were quick to strike back with their own levies, although the US then agreed a temporary truce with China and the European Union.
Costs of free trade
While economists generally agree that free trade has benefited the global economy in recent decades, they acknowledge that it comes with certain costs.
One is the loss of jobs in communities that are particularly exposed to new competition from foreign manufacturers.
That is similar to the impact of technological progress on workers. “Manufacturing jobs as a share of the labor force have come down everywhere. It isn’t a US-specific story,” said Gimber at JPMorgan Asset Management, pointing to automation.
He drew a parallel between helping workers affected by higher imports and what is known as a just transition the idea that the drastic changes needed to move toward a greener economy should be fair to everyone and minimize harm to workers and communities.
In both cases, providing workers in impacted industries with new skills or retraining them could be key, Gimber said.
Another potential cost of free trade is dependency on far-flung manufacturers. That took on new relevance during the pandemic, which snarled global supply chains, contributing to shortages of products such as face masks and respirators in the US and elsewhere.
However, economists do not typically see tariffs as a good way to build up domestic manufacturing, Fatas at INSEAD said, noting that subsidies for specific industries are viewed as a better tool “because they work more directly.”
But perhaps the strongest argument in favor of free trade is its importance to maintaining peace between nations.
As Gimber’s colleague David Kelly noted in March, closer trade relations give countries more to lose in any conflict.
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