Free Trade

Trump has said a lot of things. He made a lot of promises and a lot of them blamed “foreigners.” Aside from Trump, it seems a worthwhile to actually look at how free trade works. The economists will tell Trump that what he seems to be wanting to do cannot be done. It was not even clear how his or his helpers’ thought process worked until this week. Recently they stated:

”Mr. Trump has repeatedly said he would pull the U.S. out of NAFTA if the partner countries don’t agree on a new version with mechanisms designed to balance trade in the bloc. The Trump administration is seeking to update the original labor provisions with stronger rules aimed at lifting the salaries of Mexican manufacturing workers, whom many U.S. officials blame for taking American factory jobs.”

Before we leave Trump, it must be pointed out that his advisers have indeed found something Trump can do without Congress: Trump is imposing the tariffs under a provision of the Trade Expansion Act of 1962 that allows the president to do so for reasons of national security. That rationale has rarely been used, trade experts said, and it could lead other countries to cite their own national security to restrict imports of U.S.-made products.

Trade agreement deal with goods. They list goods that are traded and they can list some crops that the signing parties want to exclude from trade agreements. They do not include minimum wage. You cannot raise minimum wage in Mexico with trade agreements. You can demand them to do it and threaten to pull out if they don’t. The other thing is trade balance. We basically sell some high end products to Mexico and then we export food or animal feed. We have comparatively more land than other developed countries. The buying and selling does not balance out between two partners and does not even balance if you look at it world-wide. We can only use money to carry out these transactions. Somebody ends up owing money to some other group at the end of the year. It is similar to government spending. Who do we owe money to in out national debt? It could be foreign banks, government or it could even be American citizens buying bonds.

Nevertheless, these are complex issues that are not even possible to control by trade agreements. Economists tend to blame the cheap producers: “On the other hand, Joseph Stiglitz points out that countries running surpluses exert a "negative externality" on trading partners, and pose a threat to global prosperity, far more than those in deficit.” Economists also are not terribly worried about long term effects. One thing it can affect is a country’s GDP which can eventually have negative effects: “Exports directly increase and imports directly reduce a nation's balance of trade (i.e. net exports). A trade surplus is a positive net balance of trade, and a trade deficit is a negative net balance of trade. Due to the balance of trade being explicitly added to the calculation of the nation's gross domestic product using the expenditure method of calculating gross domestic product (i.e. GDP), trade surpluses are contributions and trade deficits are "drags" upon their nation's GDP.(Wikipedia).”

Between the US and the EU, trade agreements have not been completed. The Transatlantic Trade and Investment Partnership (TTIP) is a proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth.

The United States imposes a 2.5-percent tariff on cars assembled in Europe and a 25-percent tariff on European-built vans and pickup trucks. Europe imposes a 10-percent tariff on U.S.-built cars.

The United States had a $22.3 billion automotive vehicle and parts trade deficit with Germany in 2017 and a $7 billion deficit with the United Kingdom, according to U.S. government data.

The tariffs may change but the deficits will not.

All it really does is allow cheaper imported goods to be bought by citizens living in both countries as there is no tariff.

Postscript:
Trump can be so confusing. He claimed he wanted better trade deals. He did not want ANY trade deals. Hr simply wanted to put up tariffs country by country, then use this as some kind of leverage. Typical rich guy negotiating. Use your size to force deals:

The 14 months since Trump stomped into the White House have been a different kind of raw for the Japanese establishment—and increasingly unappetizing for a government that prizes strong U.S. ties above any other relationship.

Dating back to the 1980s, Trump was among America’s most vocal Japan critics. In 1989, the real estate mogul said Japan “systematically sucked the blood out of America” and called for a 20 percent tariff on all its goods. On the campaign trail, candidate Trump called for Japan to pay more for Washington’s security blanket (weapons).
And so it goes, on and on. Some few countries get preferred status.