In case you have not figured this out, Trump cannot be relied on to honor any agreement he makes.
Trump infuriated Mexico and Canada smack in the midst of attempting to get Congressional approval for USMCA, his NAFTA replacement.
The interesting detail of Trump’s latest tariff madness is that Trump went against the advice of his top trade adviser.
President Trump’s top trade adviser, Robert Lighthizer, argued against imposing escalating tariffs on Mexico https://t.co/8gQNG4snkY
— Real Time Economics (@WSJecon) May 31, 2019
“Lighthizer is not happy,” an administration official, said. “This is something he’s talked about for a long time but people always talked him out of it.”
A spokesman for Mr. Lighthizer declined to comment.
Navarro Sides With Trump
President Trump’s trade adviser, Peter Navarro, told CNBC that Trump’s threat of new tariffs on Mexico came in response to that country’s “export” of “illegal aliens.”
— Holger Zschaepitz (@Schuldensuehner) May 31, 2019
Treasury Secretary Steve Mnuchin Also Opposed Tariffs
Administration sources say Mnuchin and Lighthizer opposed Trump tariffs on Mexico.
The surprise decision to announce the tariff plan came as Trump was “riled up” by conservative radio commentary about the recent surge in border crossings.
The opposition to the tariffs by Treasury Secretary Mnuchin and Lighthizer marked a rare moment of unity from two top administration officials with starkly different economic ideologies.
“Look at what we are trying to do. This is actually a brilliant move by the president to get Mexico’s attention, to get them to help us, because so far they have just been standing by,” Navarro said.
The tariff was pushed by adviser Stephen Miller, an immigration hawk, according to a source close to the White House.
Nearly 5 Million US Jobs Depend on Mexico
Mexico & US trade > 1/2 trillion dollars in goods/services each year w/ 4.9m jobs at risk from frozen trade; when looking state by state (using 2014 numbers) CA is most vulnerable with > 1/2 million jobs dependent on trade (TX #2) @MarketWatch @TheWilsonCenter pic.twitter.com/xR1a1nWavm
— Liz Ann Sonders (@LizAnnSonders) May 31, 2019
Texas and California are the top states.
Peter Schiff Chimes In
Peter Navarro said that fewer imports from China & Mexico means more manufacturing in the U.S. Where will the money come from to build the factories, erect the supply chains, and hire and train the workers? How long will it take, and how deep will the interim recession be?
— Peter Schiff (@PeterSchiff) May 31, 2019
Mexican Peso Response
There goes $MXN peso. 3% down now – closing in on 20. A move to 21.0 would be a cumulative 10% depreciation – textbook response to offset 25% US tariffs + risks of NAFTA torn up. Spillover to rest of the world only applies through prism of US trade policy (will EU cars be next?) pic.twitter.com/ZjxcqkB1wG
— Viraj Patel (@VPatelFX) May 31, 2019
Stating the Obvious – Mexico Isn’t China
To state the obvious, Mexico is not China.
The shift in auto production for the North American market to the south is real. But Mexico runs an overall trade deficit, and, well, it needs to export autos to pay for all the refined product (gas) it imports from the U.S.
— Brad Setser (@Brad_Setser) May 31, 2019
Lie of the Day
Navarro’s on CNBC saying the U.S. economy is expanding at an "unprecedented" rate. Unprecedented? Sure, whatever you say, pal. He's finally outdone his boss on the Big Lie technique.
— David Rosenberg (@EconguyRosie) May 31, 2019
What the Heck Happened?
- Trump took advice from Peter Navarro and Stephen Miller rather than Treasury Secretary Steve Mnuchin and U.S. Trade Representative Robert Lighthizer.
- Tariffs move USMCA, Trump’s NAFTA replacement, firmly in the gutter.
- 5 Million jobs are at risk.
Three Key Points
- There can no longer be any doubt that Trump reacts emotionally, not logically.
- Trump is not playing some amazing 3-D mind game, he is an economically illiterate trade fool.
- Trump just proved to the world that no deal is safe, even deals he negotiates himself.
Point three is the most crucial. No one can trust Trump.
I firmly believe a recession will do Trump in.
If I am correct, then it is in the long-term interest of countries to react in such a way that steepens any recession.
China may cooperate in that effort.
Source: Mish Talk