President Donald Trump backed away from his threat to shut down the southern border with Mexico, but then also pledged to hit the country with automobile tariffs, a move that breaks a promise in the renegotiated North American trade pact.

Before taking the drastic step of shutting down the border, Trump told reporters, he would hit Mexico with automobile tariffs if the country did not adequately rein in the flow of migrants and illegal drugs from reaching the U.S. border.

“We’re going to give them a one-year warning and if the drugs don’t stop or largely stop, we’re going to put tariffs on Mexico and products, particularly cars,” Trump said. “The whole ballgame is cars. It’s the big ballgame. With many countries it is cars. And if that doesn’t stop the drugs, we close the border.”

A side letter included in the proposed U.S.-Mexico-Canada Agreement would mostly exempt Mexico’s car and car part exports from Section 232 tariffs, which are already in place on Mexican steel and aluminum. The agreement in the pact, which hasn’t yet been ratified by any of the three countries, exempts all Mexican cars and car parts for 60 days if the tariffs were to be implemented and then exempts 2.6 million cars, all light trucks and $108 billion worth of parts per year.

Trump’s new reluctance to shut down the border will be welcome news to the U.S. ag sector, which exports about $19 billion worth of pork, beef, dairy, grain and other commodities to Mexico every year.

U.S. dairy is one of the sectors with the most to lose in the event of a complete border shutdown. About 30 percent of all U.S. dairy exports are sold in Mexico, the largest foreign market for U.S. producers, Tom Vilsack, president and CEO of the U.S. Dairy Export Council, told Agri-Pulse.

“What’s at stake is $3.8 million of dairy product that goes across the border every single day,” Vilsack said.

Trump’s threat of a border closing may have receded, but he stressed that he is earnest in his new threat on car and car part tariffs.

“You know I will do it,” he insisted. “I don’t play games. I will do it.”

Source: Bill Tomson, Agri-Pulse