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Trump’s Mexico Trade Approach Sound and Fury But…

by John on 02/01/2017

(Disclosure here: my travel show, Undercover Jetsetter, promotes travel to Mexico. Was that a disclosure or shameless plug?)

us-mexicoMy prediction: trade and relations with Mexico will unfold like this.

A horrible argument splits two friends; hurtful things are said in anger. But after a year apart, they realize being friends was more important than the argument. 

So, it will get ugly over the next few months.  Mexico will slap reciprocal tariffs on US products like corn and natural gas, hurting some US companies.  Many Mexicans will also see less money coming from family members working here.

On the flipside, you may see Mexico take some self-initiative.

  • Already, there is talk of working on their own economy. This could unify the underestimated Mexicans.
  • Remember, Mexico graduates more engineering students than the United States does.
  • Mexico could turn to more trade with South America and China.
  • Mexico could stop cooperating with the US on anti-terrorism measures to target terrorists.

Chances are, in the long run, this could be good for Mexico and bad for the US.

So, it looks like, to paraphrase Faulkner, Trump’s plan is like an idiot with sound and fury,

But in this case, it might be signifying something.

Let’s go deeper.

Sure, Trump’s wall plan is tinged with comments of political and class hatred about rapists coming across our border.

Let’s remember comprehensive immigration reform has been on the table for six years now — and nothing — thanks to both parties.

So, let’s get past that and the rest of the BS we hear from the GOP and the Democrats which are fanned by the “lack of solutions” media.

A great place to start is this article by Clyde Prestowitz. He runs the Economic Strategy Institute.

clyde prestowitzHis book, Three Billion New Capitalists, published in the early 2000’s awoke me and millions of others about the changing world that has hit.  I have also interviewed Clyde on my radio show.  He takes complex economic issues and makes them understandable while cutting through political garbage from both sides.

This article is no different.  It is a brilliant analysis of what free-trade has done and not done for the US and the world.

Some key points:

  • Globalization and free-trade are tied together, but they are totally different giving each other a bad name.
  • Creating real free trade is difficult because of so many factors. Those factors – geopolitics, supply changes, lack of competition, and the environment — have gotten more complicated because of technology and more connectivity among nations and industries.
  • History shows us if someone can take advantage of someone else, they will. Countries are no different. Clyde shows how Japan and South Korea in the 1980s, while being rebuilt thanks to US economic post-war policies, then refused to reciprocate after their industries started taking from the US economy.
  • Another problem is the US dollar. Unfortunately, it is the worldwide currency base which makes it easy for other countries to manipulate their currencies to dump more products on us.
  • For too long, the US has bent over backwards in trade agreements to achieve worldwide peace. With more technology and better connectivity, there is no long the need for the US to continue enabling other economies.
  • The problem is maintaining US political dominance while also creating a worldwide economy that helps a lot of countries. So, how do we not withdraw politically and militarily, because without us the world is worse off, while at the same time not hurting our economy?
  • Trade policies, those in the past and those being offered now, still seem to miss the point on evolving economies that are constricted by trade agreements.

So with those points in mind, let’s take a look at what the Trump Administration may bring us — good and bad.

  • We do need new trade agreements. So I think Trump is right here. I am still praying for the good negotiator and not the psychopath critics predict.
  • But he’s going about it all wrong. The argument about a wall is absolutely ridiculous. It will waste a lot of our money and Mexico’s.  You want to add border patrols?  Great go for it.  But keep in mind, Mexico is a huge trading partner. The amount of natural gas that flows to Mexico is huge. They are the biggest buyer of one of our growing industries.
  • Trumps attitude to Mexico is also very un-American. Mexico, despite what most people think because of the drug wars, has been a good ally. Read this book, The Fix, by Jonathan Tepperman. Read the chapter on Mexico and the progress they have made reforming its government. You can also read this article by the author as well. Granted, Mexico needs a lot of political reform still. For instance, having a one term president see for six years only creates six years of a lame duck chief executive.
  • Travel is big. In 2015, nearly 26,000,000 Americans traveled to Mexico. That was an increase of 24% from the year before. Imagine if Mexico starts slapping travel fees on incoming Americans? In reality, that will hurt Mexico as well as travelers. Although, I could see a lot of Americans going to places like the Dominican Republic or other Caribbean locations.

chocopeanut butter margaritaStill, why antagonize a neighbor? Eventually, I believe we will reconcile our differences with Mexico.  I just hope it doesn’t get too ugly soon so we can’t reconcile and be good neighbors.

And I want more of you to get a chance to enjoy Chocolate-Peanut Butter Margaritas and enjoy this.

Shameless, yes.  Hey, it’s Trump Time.

Your thoughts?

 

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