Disputing Trump’s Alleged “Catastrophe” Of NAFTA With Pictures: What’s The True Source Of Trade Imbalances?

President Trump and his trade czar, Peter Navarro, are moaning and groaning about NAFTA and the US trade imbalance with Mexico.

“NAFTA has been a catastrophe for our country; it’s been a catastrophe for our workers and our jobs and our companies,” said Trump on February 2.

Let’s investigate this alleged catastrophic deal for the US with a set of pictures.

Manufacturing Employment

Trump and Navarro moan about NAFTA causing a loss of US manufacturing jobs. If anything, NAFTA stabilized or increased US manufacturing jobs for six or seven years thanks to increase in bilateral trade.

The demise in US manufacturing jobs started in June of 1979, long before anyone could blame either Mexico or China.

US Balance of Trade in Goods with Mexico

Goods Trade with Mexico

It’s impossible to make a realistic case that NAFTA hurt the US.

Explaining Balance of Trade

The seeds of trade imbalances were sewn in 1971 when Nixon closed the gold window. The trade deficit rose, then skyrocketed.

Total Credit Market Debt Owed

Following Nixon closing the gold window on August 15, 1971, credit soared out of sight to the benefit of the banks, CEOs, the already wealthy, and the politically connected.

Scapegoating

Scapegoating Mexico and China helped get Trump elected. Scapegoating also allows the Fed and central banks to blame anything and everything but lack of a gold standard.

“Our Currency but Your Problem”

The source of global trading imbalances, soaring debt, declining real wages, and the massive rise of the 1% at the expense of the bottom 90% is Nixon closing the gold window.

At that time, Nixon’s treasury secretary John Connally famously told a group of European finance ministers worried about the export of American inflation that the  “dollar is our currency, but your problem.”