NAFTA is in the hot seat, but trade isn’t as simple as America wins
With around a quarter of all U.S. imports consisting of raw materials and intermediate good that are inputs into American-made products, trade barriers that make those imports more costly also make American-made products more costly and less competitive on the global market. While the rhetoric around trade has been a straightforward, America first, the reality is a bit more complex.
Mexico sends about 80 per cent of its exports north of the border but those goods contain as much as 40 per cent US content, helping support nearly 5m jobs in the US.
All that could be at risk if, as Mr Trump has warned, the US does not achieve what it considers a “fair deal” for American workers and decides to pull out — as he has already done from the 12-nation Trans-Pacific Partnership that Mexico saw as a way to equip Nafta for the 21st century.
Reducing the trade deficit would also serve to make the dollar stronger, which further makes American products more expensive – be careful what we wish for.
While America First certainly sounds appealing in many ways for a nation that has suffered the worst recovery in history, the devil, as they say, is in the details.
“With the benefit of hindsight, [Nafta negotiations] were relatively easy because the three parties shared the same end goal. The main problem today is still that we don’t know what they [the US] want,” Jaime Zabludovsky, a Mexican Nafta negotiator, told the Financial Times.
