Consider the developments in Mexico since Mr. Trump began threatening a North American trade war. Like Canada’s socialist Liberal Party, given up for dead in December and now surging in the polls as a symbol of anti-Trumpism, hard-left Mexican President Claudia Sheinbaum of the Morena party is riding a wave of nationalism. With an approval rating reaching 85%, she too has Mr. Trump to thank.
During Mr. Trump’s visit to the Journal shortly before the November presidential election, I asked if he would “commit to protecting” the 2020 U.S.-Mexico-Canada trade agreement, which he negotiated to replace the North American Free Trade Agreement.
“Yeah, 100%,” he said. “First of all, it’s a good question. The answer is 100% yes, unless Mexico is going to allow these massive factories owned by China to make cars and then go around the horn and sell them through China or some other country where they can avoid the USMCA.”
USMCA “rules of origin” require 40% of a duty-free vehicle to be made using labor paid $16 an hour—in other words, to be made in the U.S. The rules also require 70% of steel and aluminum used in the vehicle and 75% of its value to be made in North America.
But under USMCA, passenger vehicles made in Mexico or Canada with only 62.5% regional content qualify for the World Trade Organization “most favored nation” duty of 2.5%—up to an annual quota of 1.6 million vehicles. Up to $108 billion in auto parts with 50% regional value also qualify for the MFN duty. I read Mr. Trump’s answer to my question as a warning to China not to try to produce electric cars in Mexico and export them to the U.S. under MFN duties.
“But USMCA is safe?” I asked again.
“It’s totally safe,” he said. “But we don’t want Mexico to do things that are going to be adverse to our country. I believe they won’t, because they want to keep it safe too.”
China isn’t building car factories in Mexico. But never mind. Mr. Trump has come up with a different reason to abrogate USMCA: Unless Mexico stems Americans’ use of fentanyl, he says, the U.S. will whack its largest trading partner with high tariffs.
After more than a half-century of the failed war on drugs, this isn’t a serious proposition. But it’s convenient for the White House, which believes shouting “crisis” gives the president the power to impose the tariffs under the International Emergency Economic Powers Act of 1977.
GMU Econ alum Dave Hebert explains that “tariffs are pushing our neighbors – and prosperity – away.” A slice:
Tariffs have been sold to the American people as a means of boosting the US economy and as a panacea for virtually all our ills, from our grotesque national debt to our opioid crisis. Unfortunately, they stand to backfire spectacularly, not least the recent plunge in stock prices. Tariffs drive costs and uncertainty up for American businesses, particularly in manufacturing, which relies heavily on raw materials and intermediate goods imported for their production processes. This, in turn, reduces job growth and the number of jobs available in this important sector. The deleterious effects of this are already evident, with stock markets plunging immediately following their implementation. It is only a matter of time until the labor market catches up with the stock market.
“The tariffs are going to make us very rich and very strong,” the president said when he announced the new import taxes last month. He repeated the claim on Capitol Hill last week.
But that can only be true if the way to enrich Americans is to reduce their choices and raise their prices. It’s crackpot economics, and even if Trump’s most devoted acolytes can’t see that, the market can. When the new tariffs kicked in, Wall Street began hemorrhaging; by the end of the first trading day, the US stock market had shed more than $3 trillion in market value, wiping out all of the post-election “Trump bump.”
Trump’s rhetoric about trade oozes with nationalistic resentment.
“We support Canada $200 billion a year in subsidies one way or the other,” he said at his recent Cabinet meeting. “We let them make millions of cars. We let them send us lumber. We don’t need their lumber…. We have the best lumber there is. We don’t need their lumber. What do we need their lumber for?”
None of that makes sense.
To begin with, Trump’s basic facts are wrong: The US trade deficit with Canada is $63 billion, not $200 billion. More important, a trade deficit is not a subsidy. When US consumers and companies buy goods, services, equipment, and commodities from Canadian suppliers and manufacturers, they aren’t bestowing a gift or paying above the market price. They are spending their wealth to buy things they want or need and can afford to pay foreigners to supply. The United States is not being cheated when it imports products from Canada and around the world; it is being enriched. Just like Mar-a-Lago.
Contrary to Trump’s petulant claim, we do need Canadian lumber. Otherwise, American construction firms wouldn’t buy tens of millions of cubic feet of it each year. They may want it for its particular quality, or for its proximity to northern US markets, or because of domestic supply constraints, or to take advantage of more favorable exchange rates or production costs. What matters is that they import Canadian lumber because doing so is good for Americans. The same is true of all international trade, just as it’s true of all trade across state lines and municipal lines. Both sides benefit or there would be no deal.
For most of the past 50 years, the United States has run a trade deficit with the world. For most of those 50 years, the US economy has rocked. Curtailing Americans’ ability to do business with their neighbors will not make America great again. It will only make it poorer, no matter how much Trump insists otherwise.
Steve Chapman argues that “Trump’s mass deportation campaign is draconian and lawless.” A slice:
Trump’s border czar Tom Homan says the priority is catching undocumented migrants who are criminals and terrorists, but finding 75 of those every day is not so easy. As David Bier has pointed out, “Mass deportation schemes with hard numeric targets will inevitably involve prioritizing the peaceful, because they are easy to capture, over the violent who are more difficult to detain.” That’s exactly what has played out: Thus far, many of the foreigners who have been caught in the ICE dragnet pose no discernible threat. When it made 1,179 arrests on Jan. 26, officials admitted, 566 of the detainees had no criminal records. In the first two weeks of February, NBC News reported, 41% of the 1,800 arrested were non-criminals.
But the administration doesn’t care about such distinctions. “I know the last administration didn’t see it that way, so it’s a big culture shift in our nation to view someone who breaks our immigration laws as a criminal, but that’s exactly what they are,” sneered White House press secretary Karoline Leavitt. In fact, being in the United States without authorization is not a crime but a civil offense. Many of the undocumented entered the country on valid visas and then stayed after their visas expired or they violated their visa restrictions. (Elon Musk apparently falls in the latter category, starting a company while here on a student visa that didn’t allow such work.) Many others showed up requesting asylum, as they are entitled to do under U.S. and international law, and remain here awaiting adjudication of their cases.
Bob Graboyes writes on the connection between Hamas, Hezbollah, and Hitler’s Nazis.
