President Trump Has Reached A Trade Deal With Canada And Mexico

America has not done well in trade deals in the recent past. Our manufacturing sector has suffered for a variety of reasons–high taxes, bad trade agreements, energy costs, etc. The Trump administration has begun to address these issues, sometimes more successfully than others.

This past weekend, Fox Business announced that the United States and Canada confirmed that they had reached a deal on a “new, modernized trade agreement,” which is designed to replace the 1994 NAFTA pact.

The article reports:

In a joint statement the two nations said the new deal would be called the United States-Mexico-Canada Agreement (USMCA).

Canadian Prime Minister Justin Trudeau said following a cabinet meeting, “It’s a good day for Canada.”

…The agreements reportedly boost U.S. access to Canada’s dairy market and protect Canada from possible U.S. autos tariffs.

Trump’s administration has said Canada must sign on to the text of the updated NAFTA by a midnight Sunday deadline or face exclusion from the pact. Washington has already reached a bilateral deal with Mexico, the third NAFTA member.

If Canada did not sign a new deal, Trump had threatened to impose steep tariffs on all automotive imports.

…Trump blames NAFTA for the loss of American manufacturing jobs and wants major changes to the pact, which underpins $1.2 trillion in annual trade. Markets fear its demise would cause major economic disruption.

Negotiators from both sides spent two days talking by phone as they tried to settle a range of difficult issues such as access to Canada’s dairy market and U.S. tariffs.

As part of any agreement, Canada looks set to offer increased access to its highly protected dairy market, as it did in separate pacts with the European Union and Pacific nations.

Access to Canada’s dairy market was one of the sticking points of the negotiations. Canada places high tariffs on imported dairy products in order to protect its dairy farmers.

This agreement is another indication of the Trump administration’s desire to protect the interests of America. America is simply looking for a level playing field in trade agreements. This treaty is one more step in that direction.

An Interesting Take On Tariffs

Real Clear Politics posted an article today titled, “Why Trump’s Tariffs Won’t Cost Consumers a Nickel.” I’m not sure I totally agree with that, but the ideas behind the statement were interesting.

The article states:

Critics also contend that President Trump’s tariffs will inevitably lead to higher prices for consumers.  We’ve heard this before. They said aluminum tariffs would spike the cost of a six-pack. But soda and beer prices have remained flat.

Now Walmart has joined the chorus. But we have no more reason to believe officials there than other boys who cried wolf. To understand why, let’s review how tariffs work, and how specifically the president’s tariffs work.

…Tariffs aren’t imposed on the final retail price the way a sales tax is. They are also not imposed on the wholesale price. They are not even imposed on what the importer pays at the dock when the goods enter the U.S.  The duties are imposed on an even lower price than that – and that’s a scandal in itself.

Let’s say Black & Decker wants to sell a line of toaster ovens with a $60 retail price in the U.S.  It goes to a Hong Kong middleman who deals with Chinese manufacturers. The Hong King middleman pays his cousin at a Chinese toaster oven factory $10 for toaster ovens. Black & Decker agrees to pay the Hong Kong middleman $20 for the toaster ovens, and picks them up off the boat in Long Beach, Calif.

Let’s say there’s a 10 percent tariff on toaster ovens from China. (There isn’t.)  The tariff would only be $1 because it’s calculated on what the Hong Kong middleman (says he) paid his cousin at the toaster factory – the first sale — not what Black & Decker pays to take delivery at the port – what’s known in the jargon of the trade world as the last sale. 

As a result of this accounting flim-flam, Hong Kong middlemen and the importers who love them are getting rich while taxpayers are getting hosed for untold billions of dollars the U.S. Treasury is not collecting.

The article concludes with information that shows the wisdom of what President Trump is doing:

And here’s the beauty part, how the tariffs are designed to hurt China: The Trump tariffs target items available from sources outside China.  Buy from a supplier outside China, avoid the tariff.

President Trump’s surgical strike tariffs are sending companies a clear message: Do business anywhere but China.  

And the message is getting through. Companies no longer see China as a safe space.  China needs a continued influx of foreign investment to feed its economic growth, and the president’s trade policy encourages companies to look elsewhere.

This is the reason it is good to have a businessman in the White House instead of a politician.

Good News For Indiana

Yesterday Breitbart reported the following:

U.S. Steel has announced that they will invest $750 million at their 110-year-old steel manufacturing plant known as Gary Works in Gary, Indiana, crediting President Trump’s protective tariffs on steel imports.

…“We are pleased to be making this significant investment at Gary Works, which will improve the facility’s environmental performance, bolster our competitiveness and benefit the local community for years to come,” Burritt said in a statement.

“We are experiencing a renaissance at U.S. Steel,” Burritt said.

That manufacturing renaissance for U.S. Steel comes after decades of free trade policies which incentivized American companies to readily outsource their labor force to foreign countries.

…Already, though, Trump’s tariffs have created 11,100 American jobs in six months. There have been 20 times as many U.S. jobs created because of the tariffs than those jobs that have been lost.

This illustrates why it is good to have a political outsider who is a businessman in the White House. The political establishment and the State Department would never have had the courage to reverse bad trade agreements. America cannot afford to support the world by making bad trade deals–we have serious deficits that we still have to deal with. We need to remember that when more Americans that are working, fewer Americans are depending on the government to support them. That alone cuts government spending.

The economic growth we are experiencing under President Trump is a vivid example of the fact that economic (and trade) policies matter. The elimination of unnecessary regulations combined with a tax code that is friendly to business have resulted in a degree of economic growth that Democrats told us was impossible. We need to remember who said that this couldn’t be done and vote them out of office. We then need to vote people into office who will support economic policies that result in economic growth.