Publish in Commentary - Wednesday, June 6, 2018
President Donald Trump with US Trade Representative Robert Lighthizer in the Oval Office at The White House. (Photo: Shealah Craighead/White House)
President Donald Trump’s tariffs will hurt US exporters, consumers.
President Donald Trump has taken a step closer to killing the successful North American Free Trade Agreement (NAFTA), which links the economies of the United States, Mexico and Canada.
After months of fruitless talks – where the US position appeared to be “my way or the highway” on key issues such as auto content percent and the controversial sunset clause – he imposed tariffs on steel and aluminum on NAFTA partners Mexico and Canada (as well as the European union).
After the U.S. announced it would impose the tariffs, a senior official told The Canadian Press that the chances of striking any deal on NAFTA — ever — had “just fallen through the floor,” according to the Financial Post.
Trump is imposing protectionist tariffs to help US steel and aluminum companies, yet even the aluminum sector opposes his measures, since it fails to target China while hurting other countries.
“Today’s action does little to address the China challenge while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon,” Heidi Brock, president & CEO of the Aluminum Association, said in a statement. “During a time of record demand for aluminum in the United States, it is critical that aluminum producers across the value chain have a steady and reliable source of supply."
As a result of the US violation of NAFTA, Mexico retaliated by slapping tariffs of 15 percent to 25 percent on U.S. steel products and on some agricultural goods, including a 20 percent tariff on U.S. pork imports, apples and potatoes and 20 to 25 percent rates on types of cheeses and bourbon, Reuters reports. Mexico will also start a dispute settlement process at the World Trade Organization over U.S. tariffs on steel and aluminum, Reuters reports.
Meanwhile, Mexico will continue diversifying its trade away from the United States – a trend that started as soon as Trump became president in January 2017. In the latest move, the country plans to import more pork products from Europe after imposing a 20 percent tariff on U.S. pork legs and shoulders in retaliation to steel tariffs, Reuters reports.
Trump’s tariffs will thus not only hurt imports from Mexico, but also US exports to its southern neighbor. Last year those exports reached $243 billion compared with $51.9 billion in 1993 – the last year before NAFTA entered into force.
Trump is for some reason under the impression that a US deficit with Mexico means that the US is losing and Mexico alone benefiting. Needless to say, that is utterly absurd as the deficit reflects the difference between the purchase of goods and services between the two countries. In the case of Mexico, the US simply imports more than it exports.
To top it off, Mexico – unlike China – buys a lot of US goods and services in return.
All in all, there is no doubt that NAFTA has been a success that has benefited all three member countries.
“NAFTA has made both the U.S. and Mexico more competitive and more productive through the opening of our markets and the increase of our interdependence,” Carla Hills, the US Trade Representative who negotiated NAFTA, wrote in Latinvex on the 20th anniversary of the signing of NAFTA.
In a completely senseless move aimed at protecting a few steel and aluminum companies, President Trump is hurting US exporters and consumers and the US economy.
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