Mike “Mish” Shedlock's
Sitka Pacific Capital Management,Llc
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.
True Source of Trade Imbalance
To understand the origin of trade imbalance.
Trump is clueless about trade and barking up the wrong tree.
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.