Donald Trump and the possible reform of the NAFTA, what you need to know

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Donald Trump, 45th president of the united States, in the official photo of the White House

Donald Trump begins to fulfill some of its threats to enter the White House. The Web page of the institution have disappeared references to climate change and LGBT issues. It has removed the funding to “Obama Care” (affordable health insurance). what’s next? Among its next targets will be the NAFTA (Free Trade agreement of North America) or NAPHTHA in abbreviation.

In 1994 the president George Bush (the father) signed the NAFTA with its two neighbours, Canada and Mexico. Under that agreement were much reduced the amount of tariffs to the other side of the border -or is eliminated – and encouraging investment. But Trump believes that this agreement has been bad for the american economy, have lost jobs and many millions of dollars.

Trump has threatened on Twitter to the automobile companies that produce at lower cost outside the U.S. (mainly refers to Mexico) with elevarles tariffs at 35%. Is more, wants to renegotiate NAFTA so that it is not best for US, so that it is much better. Trump said the NAFTA was the worst agreement in the History.

the united States can abandon unilaterally the NAFTA, if and when to notify you six months notice to the other parties. Under that agreement, the U.S. may not impose tariffs on goods from the outside. In theory, Trump nor can impose the tariff to specific companies, but to types of goods and nations.

For the US, there are three categories when trading:

  1. normal Ratio
  2. trade agreement
  3. No business relationship (North Korea)

Mexico would happen to scenario 1, the “most favoured nation”. The World Trade Organization provides a 10% tariff rate among countries that do not have a free trade agreement (NAFTA/FTA). If the U.S. raises tariffs, their neighbors may do the same, especially on those goods that the US need much and have little power to negotiate.

In other words, you can unleash a trade war difficult to forecast consequences. It is true that Mexico has absorbed many orders from the automotive industry, but it is very risky to blame for what has happened to american industry.

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All of these countries have free trade agreements with the united States. The policies of Donald Trump seek to renegotiate the agreements, or disengaging from them (it has not happened since 1866)

problems Big Three Detroit (Ford, General Motors and Chrysler) are not a novelty. In 2008 it declared bankruptcy, GM and Chrysler, and they needed thousands of millions of the taxpayer so as not to fall; Ford resisted. The business is remediated, they were divided between good part and bad part, and the treasury of Canada and the united states took heavy losses. Is more, the ancient capital of the engine, in Detroit, went from being a thriving city in the 50 to file for bankruptcy in 2013.

consumers had been leaving aside the domestic cars for the most rational and eastern europeans. The foreign companies were put as a condition to have a factory in the US if you wanted to import with reduced tariffs, and were mounted plants of Toyota, Subaru, Mitsubishi, Hyundai, Kia, Nissan, etc, The fuel economy was one of the reasons, as it was increasing the price of gasoline.

In Mexico occur on all cars of low price or medium, although there are producers of Premium quality that produce or will produce cars of higher end, such as Audi or BMW. If Trump rise to the 35% fee to such models, various analysts believe that it will become more inasumibles, do not buy alternatives “made in USA”, and there will be job losses, especially in the logistics sector. Let’s not forget that the mexicans, to produce cars, are not self-sufficient in parts and in its entirety.

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In Mexico produce cars at a lower cost, so that it is more appealing to models with lower margin commercial and utility vehicles, compact sedans, small

on the other hand, taste american ever pulled over by cars with a global scope, more rational. The US industry retains the production of higher margin, commercial (since it is more expensive to produce) as a pick-up truck, large SUV and sedans/mid-high. We must not forget the lessons of what happened in 2008. It may be that the measures of Trump benefit from short-term to their industry, long-term will be a disaster.

The US industry is preparing for the great value: autonomous cars, electric, etc

Possibly Trump get a renegotiation of NAFTA that is most beneficial for their country, but their partners do not give you to change anything. It remains to be seen if the Congress and the Senate are in accordance with its policies. The trade protectionism rarely works, even though the chinese can say that to them has been great. In fact China is the world’s largest producer of cars, and almost everything he does is for their domestic market. A stroke of genius.

Although the U.S. lower suddenly its imports of cars “made in Mexico” our distant relatives will not have a problem in placing their production in other countries. Is more, can compete with the US industry. The benefit for americans is very doubtful, but Trump got a lot of votes from the depressed areas of their country where before there was a thriving automotive industry. Unless Trump get miracles, it is very difficult to put tariffs will create jobs in the united States.