Trumponomics: Bringing Jobs Back to America

Trumponomics: Bringing Jobs Back to America

Military leaders generally think about war in two ways — hot and cold. Hot wars are those that spill blood on the battlefield. Cold wars pit nations’ military might against each other and involve mass espionage. But, in the 21st Century, WWIII appears to be in the form of a Trade War, and America’s Commander-in-Chief Trump has fired a shot heard round the world, saying, “We’re no longer going be the country that doesn’t know what it’s doing.”
Most civilians expected the U.S. to go mano a mano with China first. However, Trump’s campaign promises to renegotiate NAFTA and erect a border wall have put Mexico in the White House’s crosshairs.
The southern border has devolved into an economic and criminal guerilla war. Mexican drug cartels dig underground tunnels to export billions of dollars of drugs into the U.S. and import back weapons to maintain their stranglehold on illegal trade.
Since NAFTA was ratified, American workers suffered losses to the tune of more than 700,000 jobs, and that number continues to grow. The short-term benefit of inexpensive goods has given way to long-term trade and employment deficits, national debt, and serious gaps in terms of health care and college tuition. Of course, NAFTA is just one of many deals that American politicos got hustled into en route to a $20 trillion debt.
The problem for the American worker isn’t a lack of productivity. In fact, U.S. exports to Mexico have steadily increased from the pre-NAFTA days, a plus 468 percent. The issue is that Mexico has — on the backs of cheap labor — increased its northern exports exponentially, 638 percent. And, transplanted American companies gutted the country’s manufacturing base.
Pres. Trump’s seemingly narrow focus on strong-arming car companies is actually on target. Vehicles were the No. 1 import from Mexico in 2015 at a whopping $74 billion. Other major imports include electrical equipment ($63 billion) and machinery ($49 billion). Contrary to popular belief, fresh fruit and vegetables totaled only about $9 billion. That number is relatively offset by America exporting corn, dairy products and soybeans, among others.
NAFTA has been a slow bloodletting for the American worker. It allowed companies to pay Mexicans pennies on the dollar compared to American wages and benefits, and then sell back to those same jobless people. The deal also dealt a death blow to industries that support manufacturing, like American steel and West Virginia coal miners. As Sean Connery’s character put it in The Untouchables, when Clinton negotiated NAFTA, he brought “a knife to a gun fight.”
There has been much debate about the use of high tariffs on Mexican imports. This is not without precedent. In fact, Mexico has flexed their muscle over the years and slapped tariffs of up to 45 percent on American goods, claiming the U.S. wasn’t following NAFTA rules.
Like many of America’s trade partners, Mexico has far more to lose if NAFTA falls or things escalate to a full-blown trade war filled with hefty tariffs on both sides. Keep in mind that 90 percent of all Mexican imports travel north. And, most Canadian exports need to cross American soil.
In the short-term, Americans could expect higher prices on specific imported vehicles that include Audi Q5, Chevy Silverado Crew cab, Chevy Cruze, Dodge Journey, Fiat 500, Ford Fiesta, Ford Fusion, Jeep Compass, VW Golf, among others. Of course, there are many cars on the market that would be unaffected.
Other Made in Mexico products would also be affected, but the notion of noticeable inflation is far-fetched. As we are already seeing, car companies are pragmatic and plans to invest more in U.S. car building is underway. That bodes well for the workers in the American auto, steel, and coal industries.
The bottom line is that it’s in Mexico’s best interest to yield to “America First” Trumpian economics, and negotiate a fair and balanced trade agreement. In terms of trade, America has nuclear capabilities and dealmaker-in-chief Trump has his finger on the big red button.