States most affected by trade war with Mexico
From the Wallet Hub a beginning look at the impact on US:
With President Donald Trump’s plans for financing the soon-to-be-constructed border wall with Mexico sparking concerns about a possible trade battle between our two nations, the personal-finance website WalletHub conducted an in-depth analysis of 2017’s States Most Affected by Trade War with Mexico.
In order to gauge the impact of the economic fallout with Mexico on individual states, WalletHub’s analysts compared the 50 states and the District of Columbia across five key metrics. The data set ranges from “exports to Mexico as a share of state GDP” to “share of jobs supported by trade with Mexico.
Maybe Texas will be the most affected and maybe not.
Here is a link to an article in Bloomberg on 2 February 2017.
So here is the process as I understand it from that article:
1. A US company orders a capacitor from an electronic parts supplier who in this case orders that capacitor from Asia.
2. The US company then ships that capacitor to Ciudad Juarez where it is mounted on a small circuit board.
3. The circuit board is then shipped back across the US border to El Paso, apparently a necessary step to avoid taxes or tariffs.
4. The circuit board is then shipped back across the Mexican border to Matamoros where a Norwegian automotive company factory assembles the circuit board into a seat actuator.
5. The seat actuator is shipped to a seat maker in Arlington Texas, among others.
6. The assembled seats are then shipped to GM in Arlington Texas.
Obviously all of this is being done to take advantage of cheap labor in Mexico and the minimal tariffs because of NAFTA. But I wonder if the US Congress understood that this was to be the way the system worked as a result of NAFTA.
1. I am very suspicious about the US company ordering a capacitor from an electronics parts supplier only to ship it to Ciudad Juarez! Why can’t the factory in Juarez order the part or parts themselves, and populate the circuit board?
2. I am also very suspicious about why the Juarez factory needs to ship the circuit board to El Paso before it is sent to Matamoros. Why?
3. I am also very suspicious about the Norwegian company building seat actuators in Mexico. Is this why Mexico has so many other free trade treaties?
My suspicion is that NAFTA is being used to allow a Norwegian company to supply a seat actuator to US seat maker and eventually GM while paying a NAFTA tariff.
Note that nothing particularly useful was done in the US at any point until the assembled Norwegian company’s actuator arrived in Arlington Texas. But it had to be shipped back and forth across the border anyway.
Was the intent of NAFTA to allow manufacturing companies around the globe to circumvent any US tariff on their products?
That actuator has to be built somewhere. Perhaps Texas would actually benefit if NAFTA was terminated.
Or the federal government would collect a tariff or tax to offset some of the yearly deficit. There seems to be a growing agreement that not enough was done to help those who were harmed by NAFTA. I am betting the American Corporations will not be paying that bill.
I am very suspicious about the US company ordering a capacitor from an electronics parts supplier only to ship it to Ciudad Juarez! Why can’t the factory in Juarez order the part or parts themselves, and populate the circuit board?
Mexico facilities release off a blanket order. We do not release for them. They can and do populate PCBs using SMT or through hole lines.
There may be other operations to be done to a populated PCB or it might be mounted in a housing with a wire harness and shipped as an assembly to the next stage of mnanufacture.
I do not know of any Norwegian Car manufacturers.
Design and Sourcing is done in the US.
Seat actuators go to wire harnesses and at Labor Intensive. Mexico is a Labor intensive country whole the US is Capital Intensive.
Overhead is far less in Mexico than in the US. The difference in Overhead is greater than the Labor difference.
Texas would get beamed. The slowdown in growth from the fall in business transactions would suck for them(boo hoo?).