Understanding US Trade

The last two weeks have been monumental in the arena of trade, but the country was too enmired in the shallow grave of impeachment to really focus on it.

Three things happened:

 1. The USMCA (United States Mexico Canada Agreement) was passed by the United States House of Representatives.

This deal replaces NAFTA (North American Free Trade Agreement) and does great things for agriculture with Canada and US product content in goods (cars) whose final assembly is done in Mexico as well as prevailing wages.

 2. The US and China had a first date on trade — nobody is renting reception halls for the marriage, but it was a first step on the crawl, walk, run continuum.

 3. The US neutered the World Trade Organization by refusing to nominate members thereby destroying the quorum and preventing the WTO from taking any action against the US, a brilliant move. This is one that is completely overlooked.

The guy who did this is the man on the right, Robert Lighthizer.

Trade, Big Red Car?

Yes, dear reader. Let’s break it down, shall we?

China (2018 numbers)

 1. The US-China trade relationship is worth $721.1B and accounts for 911,000 jobs (2015 numbers, most recent available). [Nobody ever focuses on the jobs involved, but that is a very important part of the story. Might even be the meat of the story.]

 2. We, the USA, import $557.9B from China.

 3. The USA exports $179.3B to China.

 4. We have a $379B trade deficit. [Stop — I don’t think trade deficits are the big deal people make them out to be. I can’t come up with any truly strategic reason why we fixate on the individual trade deficit. With China, it is the cheating.]

Canada (2018 numbers)

 1. The US-Canada trade relationship is worth $714B and accounts for 1,200,000 jobs.

  2. We import $353.6B from Canada.

 3. The USA exports $360.5B to Canada.

 4. The USA had a trade $7B SURPLUS with Canada.

Mexico (2018 numbers)

 1. The US-Mexico trade relationship is worth $671B and accounts for 1,600,000 jobs.

 2. The US imports $371.9B from Mexico.

 3. The US exports $299.1B to Mexico.

 4. The USA has a trade deficit of $72.7B.

Wow, jobs, Big Red Car

Yes, dear reader, the hidden issue is the job count.

Exports to China support 911,000 jobs.

Exports to Canada/Mexico support 2,800,000 jobs.

China trade is $727.1B while Canada/Mexico trade is $1,385B — twice as big in dollars and three times as big in jobs.

As you can see, the USMCA is far more impactful than the China deal based on the size of the relationship and the number of jobs involved.

This is the kind of granular detail that the media totally misses. Be honest, did you know the relative size of these two agreements?

So what, Big Red Car?

Dear reader, the re-negotiation of the USMCA v NAFTA deal is a very good deal for the US. It will mean more and better jobs in the US. [BTW, Nancy Pelosi and the Dems in the House sat on this for 13 months because they didn’t want to give President Trump a victory. Only the impending election has gotten them off the pot.]

The US-Canada/Mexico relation is so much bigger than the Chinese relationship and we got such huge improvements in the deal.

The China deal didn’t address China’s bad acts. That is unfortunate, but it is a good move as the Chinese will increase soybean, pork, and rice imports from the USA. This solves the “farmer problem” in the US.

How big is the agriculture relationship with China? How big?

It is only $9.1B in 2018, $19.5B in 2017. Under the new agreement with China, this number will become $60B.

Ag trade with China (soybeans, dairy, sorghum, pork, skins) is tiny, but this is the issue that gets all the interest because of the impending Iowa primary. It is a crock.

BTW, the US sends more than $20B per year to Canada, more than the entire China relationship on ag. The USMCA will double this number. 

Read those numbers again — agricultural trade with China is miniscule.

Big point: I don’t trust the Chinese. Quirk of mine, but when a country imprisons 3MM Uyghers, is conducting an organ harvesting operation, is bludgeoning Hong Kong into submission — I could go on — I have a quirk: I don’t trust them.

In this instance, all the USA really did was to remove some tariffs that were not to go into effect until yesterday. We sold them used newspaper, nothing more.

How did this happen, Big Red Car?

This happened because Candidate Trump promised he would tee it up with the Chinese, and President Trump followed up on that promise.

This happened because Candidate Trump said the NAFTA agreement was a pile of dung, and President Trump cleaned it up. For 20 years, the NAFTA agreement was a pile of dung. Presidents Bush and Obama both said they were going to do something — neither did. Thanks, Trump.

This happened because the American Trade Representative is a tough-as-nails 72-year-old guy named Robert Lighthizer who can multi-task. He is known a a skillful negotiator not given to theatrics.

Lighthizer successfully negotiated these deals with President Trump, the Chinese, the Canadians, the Mexicans, and Nancy Pelosi. It was an extraordinary job.

This is what winning looks like in the trade arena. And, now, dear reader, you know the real numbers. Doesn’t the press do a lousy job of laying this stuff out?

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Monday on, y’all!