Tuesday, March 17, 2009

Mexico Strikes Back: Is This the Beginning of the Trade War?

As part of the 2009 Stimulus Package, Congress inserted ill-advised “Buy America” provisions that require organizations receiving federal funds to purchase from American suppliers. Subsequently, European and Japanese representatives warned that these provisions invite trade retaliation.

Now in response to the U.S. closure of the Mexican border to Mexican trucks traveling to the U.S. with cargo, the Mexican government has slapped tariffs on 90 U.S. industrial and agriculture products. The initial U.S. closure was President Obama’s payback to members of the Teamsters.

President Obama’s wilting under pressure from Congress with the Stimulus Package and unions with the Mexican trucking fiasco is disturbing and foreshadow a potential return to the foolish economic policies of the Hoover Administration with the passage of the Smoot-Hawley Bill in 1930. This is very bad policy and will produce slower growth, higher prices and elevated interest rates.

Ernie Goss

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