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Massachusetts Exports Rise; Trade Policy Remains Unclear

Posted by Kristen Rupert on Feb 16, 2017 9:16:13 AM

Recently-released year-end 2016 trade statistics tell a positive story for Massachusetts.

Product exports from the commonwealth increased 2 percent last year, outperforming many other US states.  Massachusetts exports totaled nearly $26 Billion in 2016.

international.flagssmall.jpgAt the same time, the relationship with our top three trade partners—Canada, Mexico and China—is likely to change as a result of new trade policies sought by the Trump administration.  What might this mean for Massachusetts companies?

The new president and his executive team have committed to renegotiating long-standing trade relationships and agreements.  First in line is NAFTA—the trilateral North America Free Trade Agreement among the US, Canada and Mexico that took effect 23 years ago.

 Many experts agree that changes to NAFTA are long overdue.  However, there is concern that the Trump administration may abandon NAFTA altogether and pursue separate bilateral agreements—one with Canada and a separate one with Mexico.  This would create significant disruption for many companies with global supply chains across North America. 

The new Trump trade team is not yet installed, which will likely delay negotiations about NAFTA.  Advocates within the manufacturing community, however, are already gathering stories about how individual US companies have grown jobs as a result of business with Canada and Mexico.   Getting this data to Congressional leaders and the new presidential administration will be critical in persuading Trump trade professionals to tweak, and not eliminate, NAFTA. 

Another proposal in play is the border tax.  Imports would be taxed at a rate up to 20 percent.  A complementary plan to reduce the overall US corporate tax rate is being touted as a potential offset.  The border tax would mean that large importers such as Walmart and Target would suffer and likely pass along cost increases to customers, while big exporters—Caterpillar, GE, Boeing - would benefit.  Small companies dependent on components produced in China or Mexico would also be hard hit by an import tax.  As with all tax rate changes, we’ll see winners and losers. 

No China trade announcements have been made since President Trump was inaugurated.  His telephone call last week with China president Xi Jinping was a first step toward repairing the damage caused by Mr. Trump’s earlier denunciation of the US’ long-standing “one China” policy.  Mr. Trump had suggested imposing tariffs of up to 45 percent on imports from China, but that proposal has not yet gained traction.

In a promising development, Mr. Trump last week signaled his support for the US Export-Import Bank, which has been operating for more than a year without a board quorum and unable to approve loans of more than $10 million.  Mr. Trump’s statement represents a departure from his previous skepticism about Ex-Im Bank. The president may make a statement about Ex-Im during his visit to Boeing in South Carolina tomorrow. 

If you are one of the more than 10,000 exporting companies in Massachusetts and you have concerns, praise or questions about proposed federal trade policy, please let AIM know.  We are in regular communication with industry and government leaders and your insights are invaluable as we convey what’s important about trade and growing the Massachusetts economy. 

Topics: International Trade, Massachusetts economy, Donald Trump

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