06 Nov Trade war woes. Click to keep reading…
Touted as the new NAFTA, President Trump struck a deal with Mexico and Canada in September, 2018. The USMCA (U.S-Mexico-Canada) agreement will ensure the continuation of cross-border commerce among the three countries. The new agreement includes changes to the rules of origin percentage for the auto industry (form 62.5 to 75 percent), along with strengthened protections for U.S. pharmaceuticals and other intellectual property. The deal still requires Congressional approval, which is expected early in 2019.
In the meantime, manufacturers are starting to feel anxious about the tariffs on Chinese imports. Many manufacturers are buying up components in anticipation of higher import prices, which may lead to shortages later in the year. Consumers should also be prepared to pay more, even if firms are fudging the impact of tariff hikes. It’s easy to pass increases along to the end customer under the tariff guise.
Foreign manufacturing has already slowed down. Factory activity decreased in Europe and Asia in September. Weakened order volumes, and an overall slowdown in trade, will potentially lead to a drag on GDP growth in 2019.