Question: Part of the goal of NAFTA (and its successors) was to economically integrate the North American economy. On April 2nd, President Trump thrusts wide range of tariffs on almost everything he imported the United States. Includes cars manufactured in Mexico and Canada. The following day, April 3rd, Stellantis (which owns Chrysler, Jeep and other brands) announced it was idling its Canadian and Mexican plants, temporarily placing 900 workers at Detroit’s powertrain and stamping plants. Why do Waud Tariff in Mexican and Canadian cars lead to layoffs in American car plants?
(The answer is below, dear reader. If you want to take a shot, stop here and continue when you’re done).
Answer: The Detroit Factory makes some of the factors in Canada and Mexico. The powertrain and stamping are inputs shipped to Mexico/Canada and assembled there. Reducing supply over the costs of Mexican/Canadian cars has led to tariffs reducing demand for American-made auto parts, leading to layoffs. It was the proactive Reirm job that was probably to create jobs for American workers.
Description: Thanks to NAFTA, the North American economy is more vertically specialized, thanks to globalization in general. To Constent, that means manufacturing plants in the US, Mexico and Canada are not replaced, but complementary to each other. One good price increase reduces the demand for its complement. Therefore, a decrease in demand leads to a decline in demand for workers, leading to temporary layoffs.
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