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Trade War?

1/27/2017
By Charles Payne, CEO & Principal Analyst

Are we on the cusp of going to war (trade) with Mexico?  I must say after Mexican President Nieto abruptly canceled his meeting with President Trump, edging ever so closer.  In fact, White House spokesman Sean Spicer at one point said Mexico would pay for the border wall via a border tax.

Spicer later clarified that it was just one of several ways to ultimately make Mexico pay for the Wall; Paul Ryan claims that it may initially cost American taxpayers up to $20 billion.

At this point, there is no denying that Mexico has gotten a better part of the bargain that is the North American Free Trade Agreement (NAFTA), signed into law by Bill Clinton, overwhelmingly supported by the Republican Party at the time.

Of course, economic purists would say there is no such thing as winners and losers in transactions where money is voluntarily given in return for goods and services.  Yet this deal isn’t that simple as there are other factors, including currency and labor costs that have eroded America’s manufacturing and trucking workforce.

NAFTA Winner?

As for the Wall itself, the issue goes beyond trade; it promotes safety and the sovereign control of borders.  In that case, America has already paid a heavy cost for housing, food, education, and providing medical services to the millions of illegals in this country.

This point was brought up by President Trump yesterday:

The American people will not pay for the wall. And I've made that clear to the government of the president of Mexico and myself have agreed to cancel our planned meeting scheduled for next week.

Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless, and I want to go a different route.

Some are saying that Mexico is already paying a heavy price in this standoff from equity market losses (EWW), and millions need to support its crumbling currency.

EWW

EWW

 

U.S./Peso Relationship

One thing’s for sure, someone is going to have to blink and I don’t think it’s going to be President Trump.  With that being said, names that normally would be crushed from a border tax held up well yesterday. 

Charles Payne
Wall Street Strategies


 

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