Will Trump’s Stance On NAFTA Lead to Manufacturing Jobs Moving to South Korea?
I don’t see how South Korea can be considered a low cost manufacturing country especially considering the KORUS FTA has made it cheaper for them to manufacture in the US compared to South Korea:
Trump hasn’t spelled out how he wants to rearrange NAFTA, but the basic idea is to encourage or compel more production in the United States, which would mean less production in places like Mexico. But that would be highly disruptive and would penalize American automakers more than their foreign rivals. Trump could probably rewrite the rules in a way that limits Mexican imports to the United States, for instance. But that doesn’t mean automakers would simply move Mexican factories north of the border. They might look for other low-cost countries instead, such as South Korea, India or China. The Trump administration could pursue trade restrictions on those countries as well, but that becomes a game of free-trade whack-a-mole in which the government is trying to tell multinational companies where to invest their money—hardly the lightly regulated pro-growth environment Trump says he wants to create.
If Trump tries to stop US automakers from producing in Mexico, that doesn’t mean he can stop foreign automakers from operating there. So the government would essentially be raising costs for American firms by forcing them out of Mexico, but not for their global competitors. [Yahoo Finance]
You can read more at the link.
I’m no economist, but if Trump lowers corporate taxes for the U.S. while placing tariffs on goods from companies who try to relocate, manufacture, and sell from overseas, then wouldn’t companies get the picture and eat the higher labor costs associated with operating in the U.S.?
Isn’t that what happened recently with Ford’s small auto manufacturing division?
I would worry about the higher costs being passed onto the consumer, but then it isn’t really like the cost savings were passed onto the consumer is it?
Is a new compact car worth $20,000 because of associated costs of manufacturing or because the manufacturers say it is?
It’s the agriculture industry (US Beef) pushing TPP and other trade deals. They rely on export sales the most.
http://farmweeknow.com/story-national-ag-groups-respond-trump-victory-3-149132
National Cattlemen’s Beef Association: “In the coming weeks, we will continue to work with Congress to pass the Trans-Pacific Partnership”
National Corn Growers Association: “Congress still has important work to do yet this year. We urge Congress to pass the Trans-Pacific Partnership when they return to Washington next month.”
It’s amazing how people in the US still think South Korea is a cheap labour country, when it’s now more expensive to manufacture cars in South Korea, than the US. I’ve seen some estimates as high as 25% wage savings for Hyundai/Kia to make cars in the US, versus South Korea. And the US plants have no unions that harasses the Korean manufacturers, as they do at home.