Trump's Dillemma on NAFTA, China - Part 2

posted by Richard Katz on November 29, 2016

Found in China, Latin America, categorized in International Trade and Investment

Tags: Richard Katz TOE Trump trade deal NAFTA

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“Why can’t American firms buy these intermediate goods from US suppliers instead?” you might ask. In some cases, US firms no longer make them. In other cases, particularly for labor-intensive supplies, the US could not make them ...


Key points:

- Trump’s dilemma is that withdrawal from NAFTA and high tariffs against China would cause enormous dislocation for American firms producing in the US; 40% of all US imports from Mexico consist of US content embodied in Mexican-assembled of Mexican-finished goods
​- US exports are highly dependent on imported inputs, e.g. a fifth of every dollar of manufactured exports consists of foreign inputs
​- US production of manufactured goods in general, and transport equipment in particular, are highly dependent on imported parts and supplies
​- The countries that send these goods to the US, whether it be Mexico or China or Canada,  are themselves part of intricate international supply chains in which their exports contain lots of foreign content, including US content
- The global ripple effects from a trade war would be enormous

About Richard Katz

Richard Katz

Richard Katz is Editor of The Oriental Economist Report, a monthly newsletter on Japan, as well as the semi-weekly TOE Alert e-mail service on Japan, and is also a special correspondent at Weekly Toyo Keizai, a leading Japanese business weekly.

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