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Trump reportedly expected to sign an executive order on NAFTA

Elena Holodny
Donald Trump

(Donald Trump.AP)
President Donald Trump is "expected to sign an executive order as early as Monday to renegotiate" the North American Free Trade Agreement with Canada and Mexico, NBC News' Kristen Welker reports, citing a White House official.

Additionally, CNN's Jake Tapper tweeted that Trump's "first executive action on Monday will be to withdraw from the Trans-Pacific Partnership," citing a senior White House official.

"Busy week planned with a heavy focus on jobs and national security," Trump tweeted on Monday morning. "Top executives coming in at 9:00 a.m. to talk manufacturing in America."

On Friday, after the president's inauguration, the Trump administration laid out its plans for trade on the White House website. The administration says it will tackle trade deals including NAFTA and TPP and will push for trade policies that "will be implemented by and for the people and will put America first."

"Blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base," the plan says. "With tough and fair agreements, international trade can be used to grow our economy, return millions of jobs to America's shores, and revitalize our nation's suffering communities.

"This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers," the plan continued. "President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then the president will give notice of the United States' intent to withdraw from NAFTA."

The administration added that it would "crack down on those nations that violate trade agreements and harm American workers in the process."

Last Wednesday, Wilbur Ross, the nominee for commerce secretary, said at his confirmation hearing that NAFTA would be an early priority for his department. He said he was "pro-trade," but only as long as it is "sensible trade."

Trump made the debate over free trade one of the central topics of his campaign after criticizing China, Mexico, and Japan. He argued in favor of ripping up trade deals, said NAFTA was "the worst trade deal in the history of the country," and called TPP "a rape of our country."

Protectionism has become more popular as American workers worry about losing jobs to other countries. And politicians across the political spectrum zeroed in on these anxieties during the 2016 campaign as they vied for the top job in the White House.

About 89% of Americans said they thought that the loss of US jobs to China was a somewhat or very serious issue, according to Pew Research statistics cited by Bank of America Merrill Lynch's Ethan Harris and Lisa Berlin in May. Moreover, only 46% of Americans said they thought NAFTA was good for the economy.

There is some empirical evidence to back up those grievances. In January 2016, labor economists David Autor, David Dorn, and Gordon Hanson published a paper showing that increased trade with China did, in fact, cause some problems for US workers.

However, trade is not the only factor that has affected American jobs in general and the manufacturing sector in particular; automation has also been a contributor.

In a recent note to clients, Capital Economics' Andrew Hunter included a chart comparing manufacturing output with manufacturing employment. Manufacturing employment has been falling since the mid-1980s and started dropping at a faster rate around 2001 — which coincides with China entering the World Trade Organization. Meanwhile, manufacturing output has been increasing since the mid-1980s and is now near its pre-crisis high.

In other words, firms have overall been able to increase output with fewer workers over the years, which is likely at least partially because of automation.

screen shot 2017 01 20 at 124600 pm

(Capital Economics)

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