What happens when you pick a fight with your third largest trading partner? Anyone know the answer? Anyone? They retaliate.
And that is just what Mexico did when Mexican officials announced their government will raise tariffs on 90 U.S. products, hitting $2.4 billion in American goods exported to our Southern neighbor. The decision by the Mexican government is in retaliation to recent legislation coming out of Congress and signed by President Obama to close the border to Mexican trucks, a clear violation of our NAFTA obligations.
Was this the first anti-free trade policy to come out of the Obama Administration or the Democratic-controlled Congress? Anyone? Yes? No? Anyone? No it was not.
The stimulus bill included the protectionist “Buy American” provision, forcing manufacturers to give preferential treatment to domestic producers of iron, steel and other manufactured goods in building contracts and other spending, forcing taxpayers to pay more money for the same goods that could be purchased more cheaply from foreign manufacturers. As a result, we will almost certainly see the same retaliation from our trading partners in Europe as we just saw from Mexico. Moreover, President Obama has signaled his administration would make it tougher to pass existing agreements such as the Korea, Colombia, and Panama FTAs.
The US has been down this protectionist road before. The Smoot-Hawley Tariff Act of 1930 was also introduced as a means to protect American workers and businesses and reduce imports during a global recession. What followed? Anyone? Anyone? The Great Depression.