Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He operates the blog MISH'S Global Economic Trend Analysis and believes in the Austrian School of economics.
If Trump decides to stick it to Mexico in the upcoming NAFTA talks, US farming industry will take a hit. In advance of the talks, the Farm Lobby is Pressuring Trump.
Trump blames the North American Free Trade Agreement – the “worst trade deal ever” in his words – for millions of lost manufacturing jobs and promises to tilt it in America’s favor.
But for U.S. farmers the 23-year old pact secures access to stable, lucrative markets in Mexico and Canada that now account for over a quarter of U.S. farm exports.
Another concern is that the mere uncertainty of open-ended trade talks could drive Mexico to alternative suppliers of grains, dairy products, beef and pork.
Next week, U.S. Trade Representative Robert Lighthizer is due to outline the administration’s goals for the NAFTA talks to Congress and the farm lobby has turned up the heat in the past weeks to ensure that its interests will make Lighthizer’s list.
Operating under the umbrella of the U.S. Food and Agriculture Dialogue for Trade, more than 130 commodity groups and agribusiness giants since Trump’s inauguration have been bombarding the new administration with phone calls and letters, public comments to USTR and face-to-face meetings with top officials who have Trump’s ear.
Lobbyists said that Lighthizer, Agriculture Secretary Sonny Perdue and Commerce Secretary Wilbur Ross have been receptive, but the wild card is how Trump ultimately will come down on the talks. They also wonder what concessions Mexico will seek from Washington in the talks due to start in mid-August.
Among the groups involved are the American Soybean Association, Corn Refiners Association and National Grain and Feed Association and firms such as Land O’Lakes, Inc., Tyson Foods, Inc., Louis Dreyfus Company North America, Archer Daniels Midland Co. and others.
For example, U.S. cotton producers, marketers and shippers in mid-June warned the Trump administration that any weakening of NAFTA “would threaten the health of the U.S. industry and the jobs of the 125,000 Americans employed by it.”
Annual U.S. farm exports to Mexico have grown from about $4 billion in 1994, when NAFTA began, to an estimated $18.5 billion this year. With Canada included, that number is forecast to reach $40 billion, quadrupling under NAFTA.
Make China Great Again
It is impossible to predict what Trump will do. He may even flip-flop multiple times at the last second.
But we have a casualty already in this absurd spat with Mexico. Ford moved a plant slated for Mexico to China instead. That was a loss for the US and a loss for Mexico.
For discussion, please seeMake China Great Again: Ford Bypasses NAFTA Dispute By Moving Focus Production to China
In January, Trump mwas bragging. It did not last long.
Stupid things (like this) happen when governments interfere in the free market.
Lose Lose Lose Affair
If Trump opts to protect US manufacturers, American taxpayers will take a hit. And it will not save a single job. Then on top of it, Mexico will likely retaliate against US farm exports.
Manufacturing will suffer, taxpayers will suffer, and the US agricultrual industry will suffer.
A genuine free trade agreement would be a win win win affair, but sadly that will never happen.
Hopefully, common sense prevails. Don’t count on it.
Mike “Mish” Shedlock