Just read the Chicago Tribune article regarding the current reworking of NAFTA. A few thoughts to share:
1. I’m curious what will happen with the new car market. As Michelle Krebs, executive analyst at Autotrader stated, new car prices will rise as production costs from Mexico will rise. This will likely impact automakers’ bottom linea, and with the requirement that 40 percent of vehicles need to be made with workers being paid $16 an hour, I can see a situation where automakers reduce their manufacturing output, which would reduce the number of workers they could hire. The deal could ultimately backfire on encouraging hiring.
2. It was interesting the note the language used by Douglas George, the Detroit-based consul general of Canada responsible for Michigan, Ohio, Indiana and Kentucky. He seemed to make sure to mention NAFTA multiple times in his comments. As we know, Trump has repeatedly deadpanned NAFTA, calling for its cancellation. George’s comments signal his attempts to highlight Canada’s approval of the original NAFTA, but also understanding the current political climate and the impact of Trump’s words.
3. If Mexico is a smart negotiator, it is giving the U.S. just enough to appease the Trump administration. As mentioned in the article, it has pursued trade deals with other countries. Mexico (and Canada too) understands that it must work with other countries and not solely dependent a significant part of its trade on the U.S.
4. The labor unions put out the statement that “Any new deal must raise wages, ensure workers’ rights and freedoms, reduce outsourcing and put the interests of working families first in all three countries.” The unions are cautious for a good reason though. Protecting workers rights through unionization has been a target for conservative governments to take down – i.e. the increase in right-to-work laws in Republican-controlled states. Will this deal actually help workers?
5. Of course, one must note the political implications. With the midterms upcoming, Trump wants a positive deliverable to point to (and he will talk it up) that could provide a boost to the Republican party.
