U.S multinational companies such as Nike and Ford are reportedly in turmoil as Trump pulls America out of the TPP deal and vows to renegotiate NAFTA.
On Monday Trump signed an executive order to pull out of the TPP deal, a Pacific Rim agreement with several other countries. He has also planned to renegotiate NAFTA which allows companies to build anything they want to in Canada, the U.S. and Mexico.
In a campaign pledge he described TPP as one of the worst trade deals ever to be signed by the U.S. His decision was driven to protect and create American jobs.
Now the multinationals are scrambling to rethink their supply chain in wake of the trade deals altering.
Protecting U.S Jobs
Much of what Nike and other multinationals manufacture is done where labour is cheap. This takes production outside of the western world. Nike together with other multinationals have faced criticism for their sweatshop working conditions in the past, where children have been employed to make shoes for pennies, and then sold for sky-high profits in richer countries.
Trump’s plan is to level tariffs on production outside of the U.S. In return he has promised to slash corporate tax and regulations.
Supply Chain Blues
The move to withdraw America from TPP will impact many multinationals that take advantage of cheap labour in Asia. As such many companies will begin to reassess strategies according to Fielding Chen, Bloomberg Intelligence economist.
The move has been met with a mixed reaction by industry although it was well supported by labour groups.
Car manufacturing is almost holding its breath to see how renegotiations will play out between Canada and Mexico in relation to NAFTA. $80bn worth of passenger vehicles and $68bn of parts were imported into America from Mexico and Canada.
President Trump is set to meet his counterparts in Mexico and Canada to discuss how he feels NAFTA should be changed.