Trump Scraps TPP—Will Renegotiate NAFTA

Donald Trump Signs Executive Order Scrapping TPP

Yesterday, Donald Trump signed an executive order to withdraw from the Asia-Pacific accord, commonly referred to as the Trans-Pacific Partnership (TPP).

He also signaled his intentions to renegotiate the North American Free Trade Agreement (NAFTA), that was signed by President Bill Clinton in 1994.

we’ve been talking about this for a long time, [and it’s]  a great thing for the American worker, what we just did

Trump said on Monday.

None of this is new: he gave plenty of warning throughout the presidential campaign, making scrapping “bad trade deals” a centerpiece of his platform and antics on twitter—having this to say about TPP:

What Withdrawing from TPP Means For America’s Economy

While playing the “counterfactual” game is sometimes a fool-errand, in this case we are able to look to historical precedent for answers.

It’s reasonable to assume that TPP probably would’ve had similar impacts on America’s economy as did NAFTA (with Canada and Mexico)—except on a much bigger scale.

NAFTA had two primary impacts on America’s economy.

1.  Because it’s nominally cheaper to do business in Mexico than in America (wages are lower, there are fewer regulations, their economy is weaker etc.), American companies had big incentives to shift production to Mexico—particularly labor-intensive industries.

This caused the balance of trade from a modest surplus of $1.3 billion, to a massive deficit of $60 billion (as of last year).

This deficit results a net loss of over 700,000 jobs due to offshoring.

US trade deficit with Mexico chart

2.  The threat of offshoring to Mexico shifts power from workers to employers (who can offshore if wages get too high).  This has contributed to the wage stagnation for American workers.

real vs nominal US wages

TPP, like NAFTA, would’ve been a disaster for American industry and workers.

It would’ve sold our people out to the highest bidder—millions of jobs would’ve been lost, and ordinary people’s wages would’ve declined further.

TPP was a wealth-redistribution scheme—your money to the elites.  Plain and simple.

About John Whitaker 36 Articles
Journalist, small cap trader, classical conservative.