Why Trump's New Trade Deal With Mexico Will Mean Higher Car Prices for US Consumers

By Robert Wenzel

Earlier this week, I wrote that Trump's trade deal must be understood within the context of the details.

The details are starting to seep out and it is a government technocrat's dream.

It appears nothing but a lobbyist full-employment act as firms will all want to get on the right side of central planner rulings.

This is not draining the swamp. It is adding
 Black Caiman crocodiles to the mix.

Chad P. Bown, senior fellow at the Peterson Institute for International Economics, explains:

After a year of tussling with Canada and Mexico over trade issues, President Donald Trump has announced a tentative deal with Mexico to replace the much-maligned North American Free Trade Agreement (NAFTA). Many important details are unknown, in part because they remain to be negotiated. But the centerpiece of the agreement—a set of new and complex rules constraining trade in the automobile industry—could be problematic for the US auto sector, and for Mexico and Canada as well. At the least, the new rules will raise the price of autos for US consumers.

The North American auto sector could suffer an even worse blow if the Trump administration imposes new import tariffs or quantitative limits on autos and parts not covered by the new deal. According to Reuters, the administration and Mexico have also agreed to a side letter implicitly recognizing Trump may apply additional tariffs on certain “nonconforming” auto imports that don’t satisfy the deal’s onerous new rules. Still looming is a separate—and yet now economically intertwined—Trump threat of trade restrictions on autos and parts from the rest of the world, including Europe, South Korea, and Japan.

There is reason to worry that the administration may indeed slap such tariffs on everyone else: Trump’s auto deal with Mexico may not “work” at meeting even his own narrow objectives unless all of his tariffs are imposed.

Paul Krugman gets it correct:

Higher costs for US consumers, quite possibly *fewer* auto jobs, and major risk of escalation into trade war. So much winning. 

Robert Wenzel is Editor & Publisher of

EconomicPolicyJournal.com and Target Liberty. 

More about Wenzel here.