Statistics of the Day: Politics-Related

BY MARTIN KICH

What is being lost in the discussion of the loss of manufacturing jobs to Mexico and our trade deficit with Mexico is that a very large portion of what we are importing from Mexico is made by American corporations:

us-imports-from-mexico

A very large percentage of the first through third and the sixth categories of goods that we import from Mexico are being manufactured in Mexican plants owned by U.S. corporations.

This movement of U.S. corporations to Mexico is reflected in the investment imbalance between the two nations:

cross-border-investment

So, the 20% tariff on goods imported into the U.S. from Mexico, which is being floated as a way to force Mexico to pay for the proposed wall along the border, will largely be a tax on goods manufactured by U.S. corporations that will now cost U.S. consumers 20% more if they wish to purchase them.

So, to put this very clearly, the displaced American factory workers, who are now earning considerably less because their decent salaries made it more profitable for U.S. corporations to build new plants in Mexico, will now be paying considerably more for the products being manufactured much more cheaply south of the border.

I may be somewhat slow on the uptake, but I don’t see how this is making any sort of meaningful point to the Mexican government—how it will persuade it that a better strategy will be to pay directly for the wall.

American corporations will certainly wait out this situation because they have now made significant investments in their Mexican facilities and because they know that any steep increases in consumer prices will create a political backlash directed at least as much against the government as against them.

 

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