When the North American Free Trade Agreement was first brokered in 1994, it established one of the largest free-trade spaces in the world between the United States, Canada, and Mexico. But if president-elect Donald Trump has his way come January 20, NAFTA will fast become a relic of the past.
One of the primary items on Trump’s first 100 days to-do list, as detailed in his “Contract With the American Voter” released in late October, is “to renegotiate NAFTA or withdraw from the deal” altogether. After his election victory on November 8, his future international trade partners are waiting to see what might actually transpire.
Canadian Prime Minister Justin Trudeau congratulated Trump on his win and expressed a willingness to discuss future trade negotiations.
“We’re hearing people on both sides of the border saying they just want a fair chance to succeed,” Trudeau said in a conference in Ottawa earlier this week. “If the Americans want to talk about NAFTA, I’m more than happy to talk about it.”
On the opposite border of the U.S., however, Mexican Economy Minister Ildefonso Guajardo seemed more cautious in his approach.
“We’re ready to talk so we can explain the strategic importance of NAFTA for the region,” Guajardo said, with a caveat: “Here we’re not talking about… renegotiating it, we’re simply talking about dialogue.”
In many respects, an end to NAFTA would have a disproportionately negative effect on relations with Mexico compared to Canada. Mexican factory exports have increased 13% since 2012 with the U.S. as a principal trade partner, absorbing more than 81% of all of the country’s exported goods. A sudden tariff placed on that trade could severely impact the cost of manufacturing goods, as well as the strength of the Mexican economy itself.
On the other hand, Canada is the top importer of U.S. goods. Though Trump’s principal rationale for abolishing NAFTA is to save American jobs from crossing borders, a tax levied on U.S. exports to Canada could ironically damage the many U.S. businesses that rely on that free trade for survival.
“I really think Canada is in an enviable position here,” said Stockwell Day, a former Canadian trade minister. “They’re going to treat trade differently, but we’ve never really heard [Trump] talking about massive numbers of factory jobs going to Canada.”
With more than two months remaining until his official inauguration, the future of NAFTA under a Trump administration remains pure speculation. After all, only 8% of all people ever accomplish their New Year’s resolutions, so whether his “100 Days” plan will produce any real changes remains to be seen.
“The range of potential actions that could be taken at the moment is very wide,” said Peter Hall, vice president and chief economist of Export Development Canada. “Elections are full of rhetoric. You never know if that’s going to turn into reality, and that’s the big dilemma at the moment.”
