Donald Trump’s ongoing trade war against China benefits México and I am hoping Trump continues it. Yes, you read that right, I am hoping Donald Trump continues his war on Chinese goods. In fact, I hope that the Trump Administration intensifies it before backing down.
As many of you likely know, yesterday, Donald Trump announced the United States – Mexico Trade Agreement, just another subterfuge from Trump for his base. The name change just masks the reality that NAFTA 2.0 is about to be adopted. In tomorrow’s post, I’ll explain to you why this is a huge win for México. Today, let us continue the discussion on why we want Trump to continue his trade war with China.
The United States is China’s largest trading partner. Canada comes in at 17th and México a distant 26th. But, the United States’ largest trading countries are China, Canada and México. Like China, México trades on low wages. That makes China, México’s largest competitor when it comes to exporting consumer goods to America.
As Mexican wages increased because of the success of NAFTA, manufacturers, who had flocked to México because of NAFTA, looked to places where goods could be produced at lower wages. China’s abundant labor force, which is huge compared to México’s took manufacturing away from México.
For México to compete with China it must prove to manufacturers that making goods in México is more cost effective, even with higher wages, than to produce the goods in China. Although México has been successful because of the close logistical infrastructure and quality of manufacturing, the labor cost factors remains a deciding factor against México. Even though wages in China may rise, the huge size of the Chinese labor force makes it very difficult for Mexican manufacturers.
The Trump Administration announced increased wages for Mexican workers. NAFTA has already increased wages for Mexicans. The wage increases to the new NAFTA is immaterial to China as long as Trump keeps pressuring China through tariffs.
By pressuring the Chinese global trade, any American trade war against China makes México more palatable to manufacturers. The longer the trade war with China lasts, the better México’s manufacturing prowess increases putting México on the vanguard of making it “too large to fail” further insulating it from future Donald Trump’s demonizing of Mexicans.
Because of that, American trade tariffs against China benefits the Mexican economy the longer the Chinese trade war lasts. The longer, the better it is for México.
So, let us all hope for a prolonged trade war with China because the longer it goes on, the stronger North America becomes.
A note on John McCain, my deepest condolence to his family and America for their loss. The following cartoon is courtesy of Cagle Cartoons:
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