Trade disputes have marked Trump’s behavior in such patent way, that when America and Mexico announced they had agreed on changes to the North American Free Trade Agreement the markets and everyone else had a sigh of relief. Nonetheless, the pompous announcement by Trump who is now starving for a win on trade agreed to a NAFTA new deal: Trump will stop saying that Mexico brings drugs and rapists to the US and abolish the law of supply and demand in exchange Mexico will stop making Trump piñatas.
But in all seriousness the relief may be short-lived because of its chaotic nature. If Canada ends up joining the so called modifications, the foundations of NAFTA would remain intact with adjustments to the rules of origin and national content mainly to car manufacturing. Trump wants workers on both side of the border to be paid $16 an hour because the average wage of Mexican manufacturing workers is $2.30 which will remove the benefit for firms to move south of the border and stay at home ignoring supply and demand for labor and capital.
By imposing arbitrary rules above the free market, these changes is a joke of the administration’s supposed opposition to invasive regulation that will not only result in decrease productivity, but higher costs and a less competitive car manufacturing in North America’s free trade area, that has to compete with producers from Europe and Asia bringing uncertainty to the market.
According to Trump, the purpose of trade is to maximize exports and minimize imports when in reality a trade deficit only means that Americans are exchanging printed paper for goods as long as the dollar remains a reserve currency.
America under Trump likes to throw her weight around the world trying to impose new rules of behavior in general and making this new attitude uniquely reckless. In short, Trump has bullied his way to what he perceives as a weaker partner when negotiating with Mexico and Canada. Moreover, he is using the stupid pretext of national security to justify his tariffs on steel and aluminum in order to circumvent the rules of the World Trade Organization which he would prefer to disavow with a stroke of his. In this atmosphere, the rules-based system of global trade, which relies on goodwill between countries, which the US helped write, may prove to be more fragile than expected in our western values doctrine of civil behavior among nations.