Trump thinks that the rest of the world is being unfair in its trade with America, and that’s why he’s withdrawing from crucial international trade agreements and threatening others, namely the North America Free Trade Agreement (NAFTA), and imposing tariffs on America’s trade partners the world over.
Trump has already virtually initiated a trade war with China, America’s largest trade partner, with another $200 billion in tariffs coming down the pipeline, and has levied steel and aluminum tariffs on literally everyone else, including NAFTA members Canada and Mexico, while threatening to levy fresh tariffs on autos imported from the EU.
While Trump thinks that applying pressure to his trade partners in this way, that he can persuade them to see the light by agreeing to more favorable trade terms for America while also convincing manufacturers to bring their production back home, hopefully to employ Americans.
But so far, that’s not how the story has played out. China has responded with tit-for-tat measures, as has Canada, Mexico, India, Japan, and the EU while there isn’t much at all to show in the way of manufacturers opening new plants in America as a share of overall manufacturing job growth. As some plants are reopening, so far, the trade war is poised to actually cost America hundreds of times the amount of jobs that it stands to repatriate.
Largely, this is due to the reality that manufacturers took their production elsewhere in order to cut their production costs, such as regulations and labor expenses. As long as there is somewhere else that imposes less regulations and offers lower wage requirements, and as long as the cost of Trump’s tariffs can be simply passed on to the consumer, manufacturers have little, if any, incentive to undergo the expense of opening up production plants in America, navigating a forest of regulation and paying first world living wages.
That is partially why, despite Trump’s tariffs and tough talk towards American manufacturers which produce their products in other countries, GM is moving forward with producing its new SUV line, the new Blazer, in Mexico.
Reuters reports:
(Reuters) – General Motors Co (GM.N) is going ahead with its plan to manufacture the new Chevrolet Blazer SUV in Mexico, a spokesman for the automaker said on Thursday, despite criticism by U.S. President Donald Trump over making vehicles abroad.
Trump has been pressing automakers to build more vehicles in the United States under efforts to renegotiate the North American Free Trade Agreement (NAFTA).
“We remain committed to working with the administration on a modernized NAFTA,” GM spokesman Pat Morrissey said, adding the decision was made years ago.
Trump has previously criticized GM for building vehicles in Mexico for sale in the United States.
The United Auto Workers union called the decision disappointing. “This is all happening while UAW-GM workers here in the U.S. are laid off and unemployed,” the union said in a statement.
Automakers have called NAFTA a success, allowing them to integrate production throughout North America and make production competitive with Asia and Europe.
Trump has repeatedly threatened to pull out of NAFTA unless the deal can be reworked in a way that favors the United States.
And, if retaliations to Trump’s tariffs regimes means that there is less foreign market participation in purchasing American autos, the manufacturer will seek to cover its productions costs which will then be dispersed across a smaller area, meaning that Americans could expect to pay more for their autos for this reason, as well as the fact that the materials from which they are made are more expensive, as a result of Trump’s aluminum and steel tariffs, as well. In this way, American cars sold to other markets will realize fewer customers as they become less competitive in their prices, meaning fewer sales revenue there from.
Therefore, Trump’s tariffs aren’t going to bring industry back to America in the manner that he thinks, they’re merely going to increase the cost of living for the American consumer by decreasing the purchasing power of the few dollars Americans do have to spend by increasing the price of the goods which Americans purchase. And we thought it was millennials who were going to kill the auto industry.
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