Trump doesn’t like NAFTA
During the debates ahead of the U.S. election, Mr. Trump called NAFTA “the worst trade deal … ever signed in this country,” and has promised to take action on the agreement early on in his tenure as president.
Trump has repeatedly blamed NAFTA for taking U.S. manufacturing jobs and has indicated he may introduce border taxes on large auto companies, as one example, who continue to produce goods in Mexico.
Trump is now talking about either renegotiating the deal or withdrawing U.S. participation – recognizing the need to observe a legally-required 90-day consultation period that would have to precede a U.S. exit.
What effect will such changes to NAFTA have on Canada?
It is most certainly not in the interest of the U.S. to disrupt the flow of goods between the U.S. and Canada. At last count, at least 35 U.S. states counted Canada as their largest trading partner, and impeding that trade would not be desirable.
However, Bank of Montreal economists have said if Trump takes unilateral steps to pull out of NAFTA, Canadian exporters and importers would be hurt by disruptions to tightly integrated supply chains across the three borders.
What would happen in absence of U.S. participation in NAFTA?
The U.S. administration seems most intent on pulling out of free trade with Mexico. It’s likely there would be financial and employment repercussions in Mexico from a U.S. exit but it’s uncertain what the scale of these would be. Some analysts say the benefits NAFTA provided to Mexico were not as large as expected anyway.
And, in absence of a three-way partnership, in all likelihood the U.S. and Canada would continue to enjoy some form of “free trade” between them as they have since the signing of their first bilateral free trade agreement in 1989.
But how does Trump really feel?
Some quotes from a February 1st White House meeting with politicians from the U.S. Senate and the House of Representatives:
"NAFTA has been a catastrophe for our country.”
"I want to change it and maybe we do a new NAFTA. Maybe we put an extra 'F' in the term NAFTA. You know what the 'F' is for, right? Free and fair trade. Not just free trade.”
"I don't care if it's the renovation of NAFTA or a brand new NAFTA, but we do have to make it fair.”
Where to from here?
If the status of your cross-border feels uncertain, you’re not alone. Even though there’s a good chance Canada’s trading relationship with the U.S. will remain strong, uncertainties are a given with a new and unpredictable leader in the White House.
Our trade and customs professionals have their ears to the ground and are watching for new developments that can affect our clients. Email us today to take the guesswork out of your import and export business.
Information provided by: U.S. Customs Dept. - Cole International