Zero Hedge: Fiat CEO Warns May Shut All Mexico Production If Trump Tariff Too High
Agree with his proposed policies or not, it's difficult to argue that Trump is delivering on his promises to the autoworkers of the Midwest who single-handedly voted him into the White House. Before even taking office, the mere threat of import tariffs has caused Ford to cancel the construction of a $1.6 billion new facility in Mexico, and has automotive CEO's from Toyota to Chrysler walking on eggshells as they carefully try to flaunt all of the capital investments they're making in U.S.-based facilities.
While likely secretly hoping for the status quo, Fiat Chrysler's U.S. CEO, Sergio Marchionne, admitted earlier today that if Trump's import tariffs are "sufficiently large" he would be forced to shutter all of his manufacturing capacity in Mexico as it would be rendered "uneconomical." Per the FT:
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WNU Editor: The U.S. market is the biggest in the world .... that is a hell of a lot of leverage when it comes to negotiating trade deals. Not surprising .... countries are getting in line to make a deal. Case in point .... Mexico Pledges Cooperation Not Capitulation in Trump Talks (Bloomberg). Top Canadian officials met Trump team for trade talks: paper (Reuters). And .... Toyota Announces Plans to Invest $10 Billion in the U.S. (Fortune). But the real action is when this happens .... Trump Is Set To Label China A "Currency Manipulator": What Happens Then? (Zero Hedge).
4 comments:
The US has a $58 billion dollar trade deficit with Mexico.
The US imports $295 billion, ( mostly subassemblies, agricultural products, followed by vehicles).
US Exports to Mexico are $236 billion, ( vehicles, machinery, tooling, machine oil, subassembly components, management services, agricultural tools and products).
Since NAFTA, US exports to Mexico have rised 434%, while Mexican imports to the US have grown $668%.
1.1 million US Jobs rely on exports to Mexico and 9.6 million jobs rely on imports from Mexico.
If Trumps Tweets close the border, both the short term and long term effects on the US will be much greater on the US than Mexico.
Mexico will no longer be a domestic and export cheap labour pool and cheap resource base for the US economy, and Mexico will once again revert to a self sustaining multilayered economy.
Jay,
If your last two paragraphs pan out, then it seems this would be good long range for both the US and Mexico in a number of ways. If the US is not dependent upon Mexico, this would probably lead to less resentment among Americans and Mexico might have more respect for its southern neighbor as well. If the border is closed, this very likely helps to diminish the illegal drug trade, diminishes the risk of things like "fast and furious" where US weapons end up in Mexico, and reduces and hopefully eliminates the de facto invasion of the US by Mexico. Again, all in all, good for both countries or so it would seem.
Now as to who would "win" a trade war, it would be best not to get into one. It seems clear that certain agreements need to be renegotiated. It would be best to do this in a respectful manner where all sides are treated respectfully. Unfortunately the rhetoric has gotten heated on all sides.
In the case of negotiations between the US and Mexico and between the US and China, I have little doubt that Mexico and China will be treated respectfully as they have allies who will support then and very influential media personnel who will tirelessly push their cause. The US does not have this. As such, ensuring the US is treated equitably may be problematic.
Fortunately there is precedent for heated rhetoric not escalating. Prior to the negotiations to end Cold War 1 it seems rhetoric was heated but when it came time to negotiate all parties were treated respectfully. Hopefully this can be the case when it comes time to renegotiate these trade agreements.
"self sustaining multilayered economy"
Sounds cute but probably can be reduced to: drug trafficking, govt corruption, and third world poverty.
Mexico is playing with fire if it thinks it has leverage in any deal with the us.
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