World's Richest Men At Odds on Benefits of Trade

 

Mexican billionaire Carlos Slim said he could see Mexico and the US working together in a ‘win-win’ scenario but the following day Trump appeared to take the opposite view after critically tweeting a company relocating to Mexico.

us dollar economy 1

Carlos Slim said in an interview with Bloomberg that he thought a potential renegotiation of the NAFTA trade deal between the US, Mexico and Canada, could be “a win-win” for both the US and Mexico.

Slim saw Mexico as being able to provide lower cost components to the US– or “insumos” as they are sometimes called in Spanish -  for US manufacturers, who could then assemble them into the finished article.

The Mexican entrepreneur also saw the establishment of US owned factories in Mexico as an excellent opportunity for America to reduce its huge trade deficit.

“With Mexico, you (the US) will buy goods but you will own the Factories here (in Mexico).

“At the end of the day you have trade but also capital movement, because the trade can have a deficit but the capital movement which gets back to the US can take out this deficit – you only leave labour and other non-tradable services,” said Slim.

However, in a tweet on the following day, Donald Trump slammed an Indiana-based company for closing its ball bearing factory in the US and moving production over to Mexico.

“Rexford of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No More!” said Trump’s tweet.

One of Trump’s hallmark policies will be cutting corporation tax to 15% according to his manifesto, however, this will not apply to companies relocating overseas.  

Trump tweeted that a punitive 35% tax would be charged on profits of any US company relocating all, or part of its factories abroad.

“The US is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the US without retribution or consequence, is WRONG!” Said Trump.

Coming the day after the Slim interview Trump’s tweets may have represented a subtle rejoinder to Slim's idea of the two countries collaborating.

If so, it would not be the first time the two billionaires were involved in a spat.

The start of their rivalry dates back to just before the start of the Presidential campaign when Slim said the election of Donald Trump would be a disaster for the US economy.

Trump then blamed Slim for a series of articles published by the New York Times in which Slim owns a majority share, which reported sordid claims made by women that Donald Trump had sexually assaulted them.

Donald Trump hit back targeting Mexicans in particular during his campaign, saying a wall should be built across the border to keep them out, that they were ‘rapists’ and the NAFTA trade deal should be torn up.

Slim Base Costs

During the interview with Bloomberg Slim said the US would need to rely on Mexico to produce low cost goods.

He said the US would struggle to make cheap goods itself since wages there were too high.

US factory workers could earn $30 an hour, Slim said, which was unfeasibly high to produce lower costs items.

He said if the US tried to make all its goods itself they would become unaffordable expensive and Trump would end up turning the populace against him. 

In Mexico he said, workers earned $15 a day, making it a more realistic base for manufacturing.

One niche open to US manufacturers, however, would be in producing “high aggregate value goods” Slim said, as these could be competitively made despite the high labour cost component.

He also said that Mexico might have a role in providing cheaper medical care to US citizens since healthcare in the US had become very expensive.

 

Save

Save

Free exchange rate forecasts