President Trump is following through on his promise to restructure the framework of U.S. foreign trade, and his strategy looks brilliant. The deal he just negotiated with Mexico, leaving Canada on the sidelines, is described as a win-win pact, benefiting both countries.
The key to benefit both sides is that China is the big loser. With the deal tightening local (U.S. and Mexico) content requirements to 75%, up from 62.5%, and imposing a requirement that workers be paid at least $16 an hour on 40 to 45% of the content, Chinese auto parts and other supplies will be squeezed out. The exports China gives up will be replaced by content produced by Mexican and U.S. workers.
It is becoming clear to me that President Trump is mobilizing the principal trade partners of the U.S. to unite to pressure China. That nation's gigantic ongoing theft of intellectual property, its currency manipulation, and its trade restrictions have led to chronic huge trade surpluses with the United States most notably, but every manufacturing country on Earth has felt the impact of Chinese manufacturing exports powered by those unfair practices. So, by using bilateral deals rather than the multilateral approach favored for the last three decades or so, President Trump is putting together a global alliance that will stand up to China and force it to stop its takeover of the world's manufacturing sector and compete like a normal country. |