These Are Mexico’s Top Exports

While readers are aware by now of the intricate trade link that binds Mexico to the US, it is more than merely autos and avocados. As the chart below shows, of the $302 billion in total Mexican exports (offset by $179 billion in imports), the largest two categories were electrical machinery & equipment, followed by nuclear reactors, boilers machinery & equipment, with motor only coming in third spot. But no matter the breakdown in categories, one thing is clear: Mexico needs the US – which imports over 80% of Mexico’s net exports – and the NAFTA agreement far more than the US does (which is not to say that the US won’t be impacted once NAFTA is eliminated).

Here are some further thoughts from SocGen’s Dev Ashish on the trade relationship between Mexico and the US:

Apart from the rhetoric coming out of the US in the past two-three months, particularly after the US election results, this week’s executive order by President Trump, essentially pulling the US out of the TPP trade agreement, has removed some of the uncertainty over the trade and investment outlook for Mexico. To a large extent this was already priced in by the market and few were hopeful of the deal going through under the new US regime.

 

What has become a greater uncertainty now is the likely path and shape of NAFTA. As we have said in the past, NAFTA has considerable value for the Mexican economy. Mexico’s exports to the US over past 12 months were at USD302bn or 81% of its total exports. During the same time, however, Mexico’s imports to the US were USD178.9bn or 46% of Mexico’s total imports. Mexico runs a trade surplus of nearly USD123bn with the US while it runs significant trade deficit with rest of the world.

 

Put simply, trade with the US has profound implications for Mexico’s investment and overall growth outlook. In a situation when the rhetoric is fast threatening to become reality, the impact of a possible change in the NAFTA provisions for Mexico can’t be overstated.

This is precisely what Trump was relying on when he called Pena Nieto’s bluff yesterday. And despite the fireworks, eventually, Mexico will have to come to the negotiating table as otherwise a substantial percentage of Mexico’s total annual exports, shown below, will suddenly find themselves with no willing buyer. Here is a list of the Top Mexican exports in the past year:

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Robots Over Roughnecks: Next Drilling Boom Might Not Add Many Jobs

Submitted by Tsvetana Parasova via OilPrice.com,

The inevitable advance of technology and automation has upended industries such as car manufacturing and food processing. Now robotics is making its way into the oil fields by helping drilling activities and putting together heavy pipes.

For companies, more automation would mean higher efficiency, safer operations, and ultimately, lower drilling and production costs. For oil rig workers, it would mean that part of the jobs lost during the oil price downturn would never return. Also, part of the new job openings would require a different type of skill set: for example, information technology and advanced computer skills.

But even if automation is expected to increase, and some day take over drilling sites and drillships, it is not the norm in the oil and gas industry today. While there have been early adopters, the oil and gas drilling business is still years away from becoming an automated activity.

Companies that had been lavishly spending on drilling at oil prices at $100 per barrel were too busy pumping oil and gas to think of efficiency and production costs. But the oil price bust has squeezed their budgets, and the firms are now seeking to cut costs while increasing efficiency.

Apart from reducing the human factor in drilling such as shifts or fatigue, or work-related accidents and incidents, automation can reduce headcount costs.

Automated drilling rigs may be able in the future to reduce the number of persons in a drilling crew by almost 40 percent, from 25 workers to 15 workers, Houston Chronicle’s Jordan Blum writes, quoting industry analysts.

Drilling company Nabors Industries expects that it may be able to reduce the size of the crew at each well site to around 5 people from 20 workers now if more automated drilling rigs are used, Bloomberg’s David Wethe says.

However, a sensitive issue such as workforce in an industry that had slashed a couple of hundred thousand jobs during the downturn has just become even more sensitive with the new U.S. administration.

“The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans,” President Trump’s America First Energy Plan states.

So companies are likely to keep a low profile on how much staff costs they would be saving.

“They’ll more likely brag about the automation rather than these head counts,” James West, an analyst with investment bank Evercore ISI, told Bloomberg.

Automation is also likely to drive small-sized subcontractors doing jobs for larger companies out of business.

Although it is expected in the not-so-distant future, automated rigs will not be replacing en masse human workforce this year or next. Right now, there are many conventional under-utilized rigs, especially in offshore drilling, where companies had slashed exploration and drilling expenditure.

In land drilling, activity in the U.S. oil patch is picking up, and employment has recently shown the first signs of gains after more than two years of declines.

Total job growth in Texas is expected to rise from 1.6 percent in 2016 to around 2 percent in 2017, Dallas Fed assistant vice president and senior economist Keith Phillips said earlier this month.

“Job growth picked up in the second half of 2016 due to a stabilization of the energy sector,” Phillips noted.

Part of the jobs lost over the past two and a half years may never return due to increased automation, but the recovery of U.S. drilling may send companies hunting again for staff this year.

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Texas Sought Banned Death Penalty Drugs From Overseas Party Dealers

Lethal injectionThe state of Texas—hell bent on procuring banned drugs to be used in lethal injection executions—nearly completed a deal with five party drug dealers in India before the men were arrested.

According to an absolutely bonkers report in Buzzfeed, Indian court documents reveal Provizer Pharma—the company equally owned by five Indian men in their twentires—was selling “psychotropic drugs and opioids illegally to people in the US and Europe,” but also had a deal in principle with Texas’ Department of Criminal Justice (TDCJ) to sell the agency sodium thiopental, a drug used in lethal injections.

The TDCJ wrote in a statement, “The agency has not engaged in any transaction with this company,” which would technically be true, because the five men from Provinzer Pharma were arrested by India’s Narcotics Control Bureau while picking up returned packages loaded with illegal drugs at a FedEx store in Surat before Provinzer’s sale of sodium thiopental to the state of Texas could be completed.

But per a Drug Enforcement Agency (DEA) report obtained by Buzzfeed, the TDCJ tipped off the DEA of the planned purchase, and even named Provinzer Pharma as the vendor.

Buzzfeed adds, “It’s unclear how the Texas Department of Criminal Justice found this small company in India that made the rounds on Internet message boards for teens and 20-somethings looking to buy drugs without a prescription,” but an American named Chris Harris ended up replacing Provinzer Pharma as Texas’ drug supplier. Harris has made sales of death penalty drugs to four states—earning over $100,000—but each time the drugs have been detained by the Food and Drug Administration (FDA).

As we’ve reported at Reason, death penalty states have had a hell of a time in recent years trying to get their hands on drugs used in executions, partially due to a European Union (EU) ban on the sale of such drugs to state governments that allow capital punishment, but also due to public backlash over the many executions which were botched because of drugs of questionable provenance and quality.

The final status of the FDA-impounded shipments of sodium thiopental from India is still unsettled. The U.S.’s lone manufacturer of the drug stopped producing it because of its use in executions, and for a time, the Obama administration’s FDA allowed states to import the drug, but the agency was eventually ordered by a federal court that it had “a mandatory obligation” to keep the “the misbranded and unapproved drug, thiopental” out of the U.S.

That ruling came down in 2012, and has served as the FDA’s go-to reasoning for refusing to release the detained shipments of drugs paid for by certain states’ dollars.

Earlier this month, the Texas Department of Criminal Justice filed suit against the FDA, demanding the release of the drugs. Ars Technica reports Texas Attorney General Ken Paxton accused the FDA of “gross incompetence or willful obstruction” in refusing to make a final decision on the fate of the impounded drugs. Paxton’s main argument is that the state has a “responsibility to carry out its law enforcement duties”—which includes executions—and thus should be granted a “law enforcement exemption” and be permitted to import sodium thiopental.

President Donald Trump might be the most enthusiastic proponent of capital punishment ever to inhabit the White House. It’s one of the few policy positions on which he has never wavered, having taken a full-page ad in four major New York newspapers back in 1989 demanding “BRING BACK THE DEATH PENALTY”, as well as writing in his 1997 book Trump: The Art of the Comeback, “I believe in an eye for an eye.” In 2010, Trump said the punishment for WikiLeaks’ publishing of classified documents provided by Chelsea Manning should be “the death penalty or something.”

When Trump gets around to appointing a new FDA commissioner, he could direct the agency to stand down on its opposition to importing the drugs, which could theoretically help states like Texas make the case that the current court-imposed injunction should be done away with in deference to the FDA’s wishes.

I reported on the numerous legal challenges to death penalty states—and their unwillingness to reveal the sources of their execution drugs—in the Reason TV documentary “The Battle for Death Penalty Transparency,” which you can watch below.

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Prediction: Donald Trump Will Take Full Credit for Decrease in Illegal Immigrants That Started in 2007

Nothing was more central to Donald Trump’s presidential campaign than his promise to deport illegal immigrants and build a wall on the border between Mexico and the United States.

Lest we forget, that’s what he opened his candidacy with, a litany of the supposed hordes of drug-carrying, disease-ridden rapists scuttering onto our pristine shores like…well, exactly like the Italian immigrants who came “direct from the slums of Europe” in the late 19th and early 20th centuries. See image to the right, from the horrid old nativist mag, Judge. The Italians even kind of look like Mexicans, don’t they? Mustaches, guns, knives, rats! The only real difference was that there were effectively no limits on immigration from Europe or Mexico until the 1920s (Asia was a different story, sadly), so the category of illegal immigrant didn’t really exist.

But here’s the thing: Illegal immigrants in the United States peaked in 2007 at 12.2 million and has since declined to around 11 million. The main reason for that isn’t because of tougher sanctions against illegals—though there’s no question that Barack Obama was indeed the “deporter in chief” and Trump’s presidential rival, Hillary Clinton, had nothing but hate in her heart for illegals, depending on the setting—it’s because the U.S. economy tanked. Immigrants, whether legal or illegal, come here mostly for economic opportunity. Indeed, that’s what the First Lady, Melania Trump, said about why she emigrated from her native Slovenia:

“I wanted to follow my dream to a place where freedom and opportunity were in abundance. So of course, I came here.”

Talk about the American Dream! Showing up here, working illegally, gaining citizenship, and then marrying the most nativist president since Teddy Roosevelt or Woodrow Wilson!

Trump is now laying out plans to build a wall and beg for funding from a Republican Congress that mostly seems all too eager to play along on this topic—remember, National Review’s Ramesh Ponnuru says that being anti-immigration is a “defining” issue for conservatives now and NR editorialized that Trump was too soft on immigration even though he pledged to deport 12 million illegals. Whether the wall ever gets built (or finished, as we’ve already got hundreds of miles of it in place), the president will be able to take credit for the slowdown that’s already years old. The number of illegals in the workforce peaked in 2007 and has also declined. Nothing is smarter than a politician who takes credit for trends that are already in place and Donald Trump is nothing if not a brilliant politician (seriously, people who think he’s a dummy or mentally ill fail to recognize his masterful campaign that eked out a victory despite his many negatives). Even more important, given his specific animus against Mexicans, Trump can take credit for reducing their numbers, which peaked in 2009 at about 6.2 million and has been dropping since (the Mexican economy offers them relatively better opportunities these days).

This wouldn’t be the first time that Trump takes credit for something that he had nothing to do with. Back in November, recall, he took credit for saving a Ford plant that wasn’t closing. In December, he took credit for creating 50,000 jobs at Sprint that had already been announced and apparently had nothing to do with him. Get ready for him to start defining victory downwards, too. The U.S. economy has limped along at around 2 percent growth for years before bumping up a bit in 2016 and the latest CBO estimates suggest 2 percent for years to come. It won’t be long before Trump starts taking credit for growth, however anemic it is.

File all that under smart politics—and utter horseshit.

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A Self-Described “Permabull” Explains Why He Is Worried

From Mark Cudmore, a former FX trader who writes for Bloomberg.

I Fear the Complacency

The market is full of counterintuitive price action. This should erode confidence and equities may see a sharp reversal lower soon.

U.S. stocks hit yet another record yesterday. It seems a weird time to suddenly turn bearish, but I’m overwhelmed by a large sense of concern as I gaze across markets.

Equity investors seem to be in denial of the threat to the global economy from Trump’s proposed protectionist policies, and instead solely concentrated on stimulus we’re not seeing yet

In contrast, FX analysts only see possible dollar support from a potential border tax and ignore the dollar negatives that would come from stimulus widening the current account deficit.

All analysis seems to be based on U.S. policy in isolation and assuming that no other country can or will react to Trump’s policies.

Trump wants to specifically raise taxes on imports from China and Mexico. So, in trade terms, mainly cheap clothes, food and oil, leaving expensive or luxury goods alone. That looks like a focus on eroding the consumer’s purchasing power. The U.S economy depends on the consumer, yet the administration calls the policies pro-growth.

The most export-dependent economies in Asia – South Korea and Taiwan – are outperforming their peers so far this year as a trade war beckons.

European bond spreads are widening rapidly. The move is led by Italy due to concern over this week’s constitutional ruling, even though that decision actually significantly reduced the probability of the anti-EU Five Star Movement gaining power.

These contradictions don’t seem to matter though, since stocks are ignoring the stress in other assets anyway, with equity volatility measures plunging. Bonds, FX and emerging markets are less convinced by the wonderful world of equities.

In recent years, I’ve been chided for being eternally optimistic, or a perma-bull, when it comes to markets. I’ve seen the ever-present fear that has pervaded markets as a positive. But now complacency abounds and it seems to hinge on not much more than hope and a prayer – I’m worried.

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The Great Rotation Ends: Largest US Equity Outflows In 4 Months; Biggest Treasury Inflows Since July

While the S&P500 market may remain pinned just why of all time highs, this appears to be from ongoing short covering, and is not – at least in the latest week – the result of new money entering the market. Quite the opposite: according to the latest BofA fund flow analysis based on EPFR data, in the latest week, US equities saw $6.3 billion in outflows, the largest weekly redemption from US mutual funds and ETFs in four months, since before the presidential election. And as investors pulled cash out of US stocks, they quickly reallocated it back into bonds, with all major classes seeing inflows, with notable mentions for government bonds, which had the biggest inflows since July 2016, and TIPS, where the demand for inflation protection is now the highest since the great China reflation scare of 2011 (it proved quite transitory).

Here are the details from BofA:

Bottom-line: investors continue to position for reflation via TIPS over munis, HY over gold & Japan over US equities; but the re-positioning feels grudging and flows have yet to show big asset allocation capitulation out of bonds into stocks

The first week of Trump: flows show largest weekly bond fund inflows in 4 months ($8.6bn), tiny equity fund inflows ($0.2bn) and precious metal outflows ($0.2bn) On bonds: inflows to HY bond funds in 8 of past 9 weeks; inflows to bank loan funds in 25 of past 26 weeks; inflows to TIPS in 31 of past 33 weeks (Chart below)…all reveal relentless bid for yield & inflation-protection; but note this week’s govt bond fund inflows were biggest since Jul’16

On equities: largest EM equity fund inflows in 3 months ($1.0bn); largest 3-week inflows to Japan equity funds in 16 months ($8.8bn); inflows to materials funds in 11 of past 12 weeks = clear bias towards reflation/inflation BofAML GWIM ETFs: last week our private clients added to risk (bank loans, financials & HY) & inflation plays (precious metals, TIPS) and sold down defensive/yield-plays (lowvol, dividend-income, munis, REITs & staples)

* * *

Asset Class Flows

  • Equities: tiny $0.2bn inflows ($5.5bn mutual fund outflows vs $5.6bn ETF inflows)
  • Bonds: $8.6bn inflows (largest in 4 months) (5 straight weeks)
  • Precious metals: $0.2bn outflows (outflows in 10 of past 11 weeks)

Fixed Income Flows (Chart 2)

  • Inflows to HY bond funds in 8 of past 9 weeks ($1.5bn)
  • 5 straight weeks of IG bond inflows ($3.6bn)
  • 11 straight weeks of inflows to bank loan funds ($1.1bn)
  • 7 straight weeks of inflows to TIPS funds ($0.5bn)
  • First outflows from EM debt funds in 4 weeks ($0.4bn)
  • Largest govt bond fund inflows since Jul’16 ($1.4bn)

Equity Flows

Japan: strong $3.1bn inflows (inflows in 4 of past 5 weeks)

EM: $1.0bn inflows (largest in 3 months)

Europe: small $0.2bn inflows

US: $6.3bn outflows (largest in 4 months)

By sector: largest healthcare outflows ($1.0bn) from healthcare in 10 months (outflows in 8 of past 9 weeks); largest tech inflows in 14 months ($1.0bn); inflows to materials in 11 of past 12 weeks ($0.6bn)

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Barack Obama Is Now The Only President In History To Never Have A Year Of 3% GDP Growth

Following today's extremely disappointing US GDP growth data, we have the final nail in the coffin of President Obama's economic reign. Not only is the average annual growth rate of just 1.48% during Obama's business cycle the weakest of any expansion since at least 1949, he has just become the only President to have not had even one year of 3% GDP growth.

An average annual GDP growth of 1.48% during Obama's two terms…

 

As a reminder to a few blinkered media types, this means President Obama's "recovery" has officially been the worst recovery in US history (despite adding almost $10 trillion to the national debt)

 

And worse still, Barack Obama is the only president in US history to never have a year of economic growth over 3.0%…

As we noted previously, every other president in American history, even the really bad ones, had at least one year when U.S. GDP grew by at least 3 percent.  But this has not happened under Obama even though he has had two terms in the White House.

As a reminder, this dismal economic track record came at the same as President Obama almost doubled the National Debt…

When 'fake news' and 'peddling fiction' meet 'alternative facts'.

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Sorting Through Trade, Tariffs, Taxes, and Trump on SiriusXM Insight from 12-1 p.m. ET

Today at noon eastern I am once again guest-hosting The Dean Obeidallah Show on SiriusXM Insight, channel 121, and we will be engaging in some mixture between TGIF and ICBIOBOW (I Can’t Believe it’s Only Been One Week). In the second half of the program I will be joined by the invaluable trade attorney/commentator Scott Lincicome, to sort through the confusing bluster surrounding Donald Trump’s feud with Mexico, his plans for a 20 percent “border tax,” and what other euphemisms for tariff we can expect.

And for the duration of the show I’ll be joined by the provocative and original thinker/doer James Poulos, author of the brand new The Art of Being Free: How Alexis de Tocqueville Can Save Us from Ourselves. We shall certainly apply his insights to the dawning Age of Trump. Please call the program any time (at least while I’m on it), at 1-877-974-7487.

Poulos two weeks ago was interviewed by Nick Gillespie for the Reason podcast. Listen to that below:

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What Trump’s Wall Says To The World

Submitted by Patrick Buchanan via Buchanan.org,

“Something there is that doesn’t love a wall,” wrote poet Robert Frost in the opening line of “Mending Walls.”

And on the American left there is something like revulsion at the idea of the “beautiful wall” President Trump intends to build along the 1,900-mile border between the U.S. and Mexico.

The opposition’s arguments are usually rooted in economics or practicality. The wall is unnecessary. It will not stop people from coming illegally. It costs too much.

Yet something deeper is afoot here. The idea of a permanent barrier between our countries goes to the heart of the divide between our two Americas on the most fundamental of questions.

Who are we? What is a nation? What does America stand for?

Those desperate to see the wall built, illegal immigration halted, and those here illegally deported, see the country they grew up in as dying, disappearing, with something strange and foreign taking its place.

It is not only that illegal migrants take jobs from Americans, that they commit crimes, or that so many require subsidized food, welfare, housing, education and health care. It is that they are changing our country. They are changing who we are.

Two decades ago, the Old Right and the neocons engaged in a ferocious debate over what America was and is.

Were we from the beginning a new, unique, separate and identifiable people like the British, French and Germans?

Or was America a new kind of nation, an ideological nation, an invented nation, united by an acceptance of the ideas and ideals of Jefferson, Madison, Lincoln and Dr. King?

The Old Right contended that America existed even before the Revolution, and that this new nation, this new people, wrote its own birth certificate, the Constitution. Before Washington, Madison and Hamilton ever went to Philadelphia, America existed.

What forced the premature birth of the nation — was the Revolution.

We did not become a new nation because we embraced Jefferson’s notion about all men being “created equal.” We became a new people from our familial break with the Mother Country, described in the declaration as a severing of ties with our “brethren” across the sea who no longer deserved our loyalty or love.

The United States came into being in 1789. The Constitution created the government, the state. But the country already existed.

When the Irish came in the mid-19th century to escape the famine and the Germans to escape Bismarck’s Prussia, and the Italians, Jews, Poles, Greeks, Slovaks came to Ellis Island, they were foreigners who became citizens, and then, after a time, Americans.

Not until decades after the Great Migration of 1890-1920, with the common trials of the Depression, World War II and Cold War, were we truly forged again into one united nation and people.

By 1960, almost all of us shared the same heroes and holidays, spoke the same language and cherished the same culture.

What those with memories of that America see happening today is the disintegration of our nation of yesterday. The savagery of our politics, exemplified in the last election, testifies to how Americans are coming to detest one another as much as the Valley Forge generation came to detest the British from whom they broke free.

In 1960, we were a Western Christian country. Ninety percent of our people traced their roots to Europe. Ninety percent bore some connection to the Christian faith. To the tens of millions for whom Trump appeals, what the wall represents is our last chance to preserve that nation and people.

To many on the cosmopolitan left, ethnic or national identity is not only not worth fighting for, it is not even worth preserving. It is a form of atavistic tribalism or racism.

The Trump wall then touches on the great struggle of our age.

Given that 80 percent of all people of color vote Democratic, neither the Trump movement nor the Republican Party can survive the Third Worldization of the United States now written in the cards.

Moreover, with the disintegration of the nation we are seeing, and with talk of the breakup of states like Texas and secession of states like California, how do we survive as one nation and people?

Old Europe never knew mass immigration until the 20th century.

Now, across Europe, center-left and center-right parties are facing massive defections because they are perceived as incapable of coping with the existential threat of the age — the overrunning of the continent from Africa and the Middle East.

President Trump’s wall is a statement to the world: This is our country. We decide who comes here. And we will defend our borders.

The crisis of our time is not that some Americans are saying this, but that so many are too paralyzed to say it, or do not care, or embrace what is happening to their country.

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