One way to detract from the fact that the USMCA trade agreement may not be ratified is to kill it before it has even been discussed in Congress.

On May 20, 2019, President Trump announced a 5% tariffs on Mexican goods would go into effect on June 10, unless Mexico “curbs illegal migration” at the US Mexico Border. It is unclear what the measure of “curb” is here, but perhaps that is his point. These tariffs are supposed to grow steadily up to 25% by Oct. 1, 2019.

Deutsche Bank reminds us that two-thirds of U.S.-Mexico trade is between factories owned by the same company. Source: Deutsche Bank Research

A previous blog pointed out that bilateral trade balances are not the proper metrics to analyze a country’s trade competitiveness (see here). Now we have had enough time with Trump tariffs to see the issue unfold in the data as US importers are rapidly shifting suppliers to countries outside of China (to which the trade deficit will follow). 

The National Bank of Canada noticed that Canada, as the largest trading partner of the US would benefit from the trade diversion created by the US-Chinese tariff war. The statistical analysis seems a bit suspect (a 1% reciprocal tariff increase is supposed to result in increased Canadian exports to the US that lift Canada’s real value added by about 0.8%. But the tariff increase is going to be 10%-25%). Nevertheless, it is nice to see that someone picked up on the trade diversion concept. A windfall for the Canadians and another loss for American consumers.

It turns out, just when President Trump wrote his epic “The Art Of The Deal” fiction novel. He was losing billions of dollars to bilk the US Government/IRS and private banks out of revenues. He called this behavior a “sport.” Although the arch-conservative Washington Inquirer newspaper notes that his “sport” cost tens of thousands of honest Americans dearly. 

He may be following a similar script in his trade negotiations with China. On less than a week’s notice, increased tariffs on $200 billion in Chinese imports to 25% tariff (I wonder what that will do the iPhone…). The WSJ reports that the first round of Trump tariffs cost US consumers $69 billion, this new round will be substantially more expensive. Now Trump threatens virtually all Chinese imports with tariffs. The Chinese will retaliate.

One interest group is being taken care of, however, Trump tweeted that US government would “buy agricultural products from our Great Farmers, in larger amounts than China ever did.” That’s in addition to the $12billion handout farmers already received in January 2019 to compensate them for earlier tariff-related trade losses.

Herman Cain, Tea Party activist, former presidential hopeful, and Trump’s uniquely unqualified Fed nominee withdrew April 22, 2019, although he had adamantly stated 4 days earlier that he would “continue the fight.” That was after Senate Republicans withdrew they support for his confirmation.

Ten days later, Stephen Moore, ‘American Writer’ at the Heritage Foundation, and Trump’s other uniquely unqualified Fed nominee also withdrew only hours after his “I’m all in” pledge. Incoherent interviews showed him struggling to explain away his lunatic economics statements/forecasts, and his disqualifying misogynistic and racist statements/jokes did him in.

Let’s hope the next nominees are qualified.