Taking Stock: Amanda Lang speaks with Pennsylvania Governor Josh Shapiro

Key Concepts

• USMCA (United States-Mexico-Canada Agreement): The current free trade agreement under review, which Governor Shapiro argues needs amendments to address modern economic realities.
• Tariffs: Taxes on imported goods that the Governor argues are driving up domestic prices and harming local manufacturers.
• Supply Management: A system of agricultural trade regulation that the Governor identifies as a potential "trade irritant" requiring discussion.
• Transshipment: The practice of routing goods through third-party countries (e.g., China to Thailand to Canada) to circumvent trade regulations.
• MOU (Memorandum of Understanding): A formal agreement signed between Ontario and Pennsylvania to foster cooperation in energy, nuclear power, and critical minerals.

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1. Trade Relationship: Ontario and Pennsylvania

The economic partnership between Pennsylvania and Canada is significant, characterized by balanced trade flows:

• Trade Volume: Approximately $14 billion in goods flows in each direction annually.
• Market Share: Canada is Pennsylvania’s largest trading partner, accounting for 27% of the state’s total goods exports. Ontario and Quebec represent 86% of this trade, with Ontario alone responsible for 50%.
• Employment Impact: Trade with Canada supports 346,000 jobs in Pennsylvania, with over 300 Canadian businesses operating in the state and employing 30,000 people.
• Key Sectors: Equipment, machinery, metals, minerals, agricultural products, and chemicals.

2. The USMCA and Trade Policy

Governor Josh Shapiro advocates for a "non-zero-sum" approach to trade, emphasizing that the USMCA should be amended rather than discarded.

• Proposed Amendments:
  • Chinese Inputs: Addressing the issue of Chinese goods being "parked" in third-party countries (like Thailand) to bypass trade barriers.
  • Service Economy: Updating the agreement to better reflect the modern digital and streaming economy, which was less prominent when the USMCA was originally drafted.
• Stance on Tariffs: Shapiro explicitly criticizes federal tariff policies, stating they have "shuttered markets" for farmers and increased costs for domestic manufacturers.

3. Real-World Case Studies and Economic Impact

• Voith (York, PA): A manufacturer of hydroelectric turbines. Despite sourcing raw materials domestically, the company faces higher production costs due to tariffs on raw materials, illustrating how trade barriers negatively impact even non-importing domestic firms.
• Eli Lilly: Pennsylvania successfully competed against 300 other jurisdictions to secure a new site for this pharmaceutical company.
• AWS (Amazon Web Services): Recently committed to a $20 billion investment in Pennsylvania, marking the largest private-sector investment in the state's history.

4. Economic Strategy and Growth

Governor Shapiro describes himself as a "pro-growth" leader, focusing on:

• Tax Policy: Implementing seven tax cuts to reduce the cost of living and doing business.
• Growth Sectors: Prioritizing agriculture, manufacturing, robotics, technology, energy, and healthcare.
• Federal vs. State Conflict: Shapiro argues that while state-level policies are putting money into citizens' pockets, federal policies (tariffs and inflation) are "yanking two or three dollars out," creating a difficult environment for the state economy.

5. Notable Quotes

• "I don't view this relationship as a zero-sum game. I think both sides can benefit." — Governor Josh Shapiro on the US-Canada trade relationship.
• "Sometimes you pound on the table. Sometimes you got to yell at your friends, but you do it in a way that is constructive." — Governor Shapiro on managing diplomatic disagreements.
• "The president by starting this tariff war, really, has driven up the prices of everything and shuttered markets for many more." — Governor Shapiro on the impact of federal trade policy.

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Synthesis and Conclusion

The video highlights a tension between state-level economic success and federal-level trade friction. While Pennsylvania has achieved significant growth through targeted investments (AWS, Eli Lilly) and tax reforms, Governor Shapiro warns that federal protectionist policies—specifically tariffs—are undermining these gains by inflating costs for domestic manufacturers and closing export markets for farmers. The core takeaway is a call for a modernized, stable USMCA that addresses Chinese transshipment and the digital service economy, framed within a philosophy that views Canada as a reliable, essential partner rather than a trade adversary.