Economy Memo

320 Washington St,

North Easton, MA 02357

19 April 2017

From: Orlando Manfredi 

To: US Trade Representitive;  Robert Lighthizer

Thru: The Office of the United States Trade Representitive

Subj: A Rebuttal of Anti- Free Trade Tactics

1 The Campaign Pitch 

President Trump during his campaign ran on the promise that he would bring manufacturing back to the United States and would do this through ensuring companies "buy American and hire American" as well as a liberal use of tariffs on nations that out compete the United States in terms of unskilled manufacturing products. Trump also promised that he would renegotiate all free trade agreements to ensure that they benefit America primarily over all others involved. This platform proved to be fairly successful on the campaign trail but when actually implemented numerous experts have come out against it. 

2 The Policy

Historically President Trump has had the most grievances with China and Mexico, and has stated that he will retaliate against the two countries with a blanket tariff or VAT tax of 35-45% and that he would renegotiate NAFTA. Trump has also been negotiating with individual companies who threaten to move production elsewhere to remain or increase their presence in the United States. This has been done with both Carrier and Samsung. 

3 The Problems

In 2015 the US imported $303 billion worth of goods from Mexico and according to the US Chamber of Commerce there are 6 million US jobs that require that there is free and open trade between the two countries. Tariffs in the end leave the brunt of the tax increase on consumers and not the companies who often times simply alter their pricing models to offset the increase in taxes. Due to the globalized economy many things that would normally be produced in the US would not be able to as a result of not being able to afford the base materials at a competitive price. Trump also proposed applying an even larger tariff on Chinese goods which would logically have an even more devastating impact. If Trump implements a 45% tariff on Chinese goods, economists predict that exports from China would decrease by at least half resulting in a loss of $385 billion worth of goods as of 2016, with little to no means of the United States of picking up the demand that would increase tremendously as a result of such a decrease in supply. 

5 Conclusion

President Trump's plan for increased tariffs will have disasterous consequences as companies will not be able to produce the amount of goods demanded for an affordable price and if global trade is to continue the burden of the increased taxes will ultimatly be shrugged off by companies who have control over thier own goods and onto consumers who are faced with either buying the good at a higher price, finding a domestic equivalient for a high price or simply going without. There is no conceivable way that these tariffs can help the US worker or the US economy.  

Sources

http://money.cnn.com/2017/01/26/news/economy/trump-mexico-tariff/

http://www.economist.com/news/briefing/21711498-whatever-he-thinks-dealmaking-wont-help-mr-trumps-trade-negotiations-donald-trumps-trade