Page 21 - OBW Winter Ed 2018

+++MONEY ++ MONEY ++ MONEY+++

What’s interesting is that Fiat Chrysler had plans to stop producing
trucks in Mexico, but changed their mind after the new NAFTA deal.
Eliminating the tariffs will allow that plant to keep operating from its
Mexico base and it’s poised to become number two in U.S. pickup truck
sales.

Dairy products are another area impacted by USMCA. Remember
when Trump tweeted about how unfair he thought it was that Canada
charged such high tariffs on U.S. dairy products? That’s because America
had an oversupply of milk and Trump said Canada made business for
American dairy farmers “very difficult.” The Canadian government
had historically limited how much dairy the farmers could produce to
keep milk prices high and to prevent farmers from losing money. It also
restricted how much foreign dairy could cross the Canadian border.
The new deal will increase the amount of milk, cheese and cream the
U.S. can ship tariff-free. The old NAFTA has actually been good for
Mexico however, as U.S. dairy exports there have grown five-fold in the
last couple of decades.

A few other components of the new deal outline penalties for pirating
movies online, eliminates duties on books, video games and software
distributed electronically, along with stronger intellectual property
protections, such as biotech patents and financial services.

Mexico had to make a lot of concessions for Trump’s new deal. This
could stall Mexico’s manufacturing growth, or help it. An opinion piece
in The New York Times suggested that Trump accepted a watered down
version of the new North American Trade Agreement in exchange for
a confidential commitment by Mexico to do Washington’s dirty work
against would-be immigrants and refugees. It’s speculation at best, but
we’re keenly aware of Trump’s stance on immigration.

Trumps initial goals were to reduce the United States trade deficit
with Mexico and create more good, high-paying jobs. Let’s hope this
modernized agreement will do what it is intended to do.

While Trump tweeted afterwards, “The USMCA is a historic
transaction.” We’re taking a watch and see view on that.

Dieter Esch
Chairman

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