Imagine a widget factory that was in St. Louis before NAFTA. And now it is in Reynosa, Mexico just across the border from McAllen, Texas. The factory used to employ Americans at $20 per hour. Now it employs Mexicans at $1.25 per hour.
How does Donald Trump negotiate a better deal? Is this not a binary situation? Either the factory is in the USA, or it is in Mexico. Either St. Louis makes the widgets, or St. Louis burns.
No, NAFTA cannot be fixed; it can only be smashed.
So, what if we do smash it? What if we put tariffs on manufactured goods such that it is no longer profitable to locate factories in Mexico? There will be a mass exodus of factories back to the USA, a mad scramble to staff them, and a lot of poor people will be able to live in apartments instead of refrigerator boxes. So, that would be a good thing for the USA.
But Mexico will retaliate. They will absolutely put tariffs on American agricultural exports. Flyover country senators will storm the Oval Office, and Trump’s Secret Service detail will have to beat them back with batons. Those are the guys that Trump will have to negotiate with. And that may not be easy, or even possible. Those senators might be able to block everything that Trump tries to get through Congress.
Agriculture is a much smaller employer than manufacturing. So, if you want to create a lot of jobs, trading agricultural exports for factories is the way to do it. Probably the only way that we will ever be able to substantially reduce the 43 million people that we have on food stamps.
We need to do something dramatic and earth-shaking; not send Carl Icahn to Mexico City to negotiate. This has nothing to do with the Mexicans or the Chinese or the Indians. They are just the lucky recipients of the vast program of carpetbagging set into motion by David Rockefeller long ago.
What we should do is announce to the world that we have screwed up: Don’t take it personally; it’s us, not you. We have dug ourselves a giant hole, our cities are burning, and the only way dowse the flames is to institute an across-the-board tariff on imports of goods and services. A protective tariff that will be high enough to bring back our factories from Mexico and China, our call centers from Eastern Europe, and our IT shops from India.
There are about 3,000 maquiladoras employing 1 million Mexicans along the border. What if we moved all those plants to Texas? That would totally eliminate poverty in the state, right? Wrong. Texas has 3.7 million people on food stamps. The size of our poverty problem (not to mention the corresponding national debt) is GARGANTUAN. Anybody who tells you that there is another way out is living in a dream world.
Note: Mexico and Canada have a lot of oil. However, if we abrogated NAFTA, I suspect that they would still want us as a customer.
Note: Not all of the plants went to the maquiladora belt along the border. There are many more further south. For example, here is a GM plant in Silao:
This is a live map, so you can click the “+” to zoom in, etc. If you own a Chevy Silverado, it may have been built in Silao.