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June 4, 2018 | NAFTA is Dead: Trump Seeks Separate Agreements With Mexico and Canada

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Trump proposes NAFTA by another name. But it won’t look like NAFTA. He wants tailored bilateral trade agreements.

President Trump says Mexico and Canada are ‘very different countries’. That is true of any two countries, even countries in the EU. And on that note Trump Raises Prospect of Separate Trade Deals With Canada, Mexico.

“I wouldn’t mind seeing Nafta where you’d go by a different name… a separate deal with Canada… a separate deal with Mexico,” Mr. Trump told reporters.

“These are two very different countries,” Mr. Trump said, adding that in his opinion the U.S. loses “a lot of money with Canada” because of the existing framework, and loses “a fortune with Mexico.”

NAFTA is Dead

The Globe and Mail proclaims NAFTA is Dead and Canada Should Move On

NAFTA – at least as we know it – is dead. Donald Trump just killed it.

The reckless and crippling 25-per-cent tariff on steel and 10-per-cent tariff on aluminum that the U.S. President’s administration just used to bludgeon Canada and Mexico (not to mention the entire European Union) is the murder weapon.

When someone keeps threatening to smash you, as Donald Trump has since he announced his candidacy for president, it usually pays to take them seriously. Today, even the most committed somnambulist can’t ignore what the U.S. administration has done.

How can we for a moment believe that a renegotiated NAFTA can protect us from further unwarranted and equally ferocious economic attacks from our putative partner? The risible pretext that U.S. Commerce Secretary Wilbur Ross trotted out for the tariffs was “national security,” because, as he put it, “without a strong economy, you can’t have strong national security.” We can expect this elastic interpretation to be the standard approach of the Trump administration to any disputes under a renegotiated NAFTA.

The only negotiating stance that works against Donald Trump is the ability and willingness to walk away.

Disputing NAFTA

Every time I mention trade, at least one misinformed reader blames NAFTA for the loss of manufacturing jobs. It happened again yesterday. And it’s nonsense.

NAFTA Not Responsible For Loss on Manufacturing Jobs

Manufacturing jobs peaked in June of 1979, nearly 15 years before NAFTA. Also note that manufacturing jobs rose for the first eight years after NAFTA started.

How many times do I have to post that chart before people look at it?

Manufacturing Share of Employment

As a percentage of employment, manufacturing’s decline started in 1960 for Both the US and Canada.

Balance of Trade

Trump moans the “US loses a fortune” with Mexico. The above chart shows Trump is wrong.

Moreover, a cheap supply of parts helps keep auto prices down. Consumers spend the savings elsewhere. Jobs are created, not lost, in the process.

Dear NAFTA Bashers: You Need New Charts

For a collection of still more charts on the absurdity of NAFTA bitching, please see Dear NAFTA Bashers: You Need New Charts.

True Source of Trade Imbalance

Trump is clueless about trade and barking up the wrong tree.

Mike “Mish” Shedlock

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June 4th, 2018

Posted In: Mish Talk

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