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A reminder of some of the places that could see an economic backlash if the president ends up blowing up the North American trade deal.
President Trump, in an Easter Sunday tweet about border security and immigration, focused his ire at Mexico and threatened to not only stop any deal on the Deferred Action for Childhood Arrival program but also upend the North American Free Trade Agreement with Canada and Mexico.
It’s certainly not the first time Trump has raised the prospect of blowing up NAFTA as president. But the sabre-rattling, which comes ahead of the next round of negotiations over the North American trade deal that are set to get underway this month, prompts important what-if questions, like: What would the economic repercussions be if Trump ended up terminating NAFTA?
As Route Fifty’s Bill Lucia reported in mid-March, the Moody’s Investors Service credit ratings agency released a report looking at the possible fiscal impacts of a NAFTA backlash, identifying the states most vulnerable to a loss in NAFTA-related trade:
In Michigan, Texas, Vermont and North Dakota, the Moody's brief notes, NAFTA-related trade accounts for over 10 percent of gross state product—a measure of economic activity.
That's compared to the U.S. as a whole, where trade with NAFTA partners is about 5.8 percent of gross domestic product.
Michigan is the state that is most dependent on NAFTA-related trade, according to Moody's.
And Detroit, the ratings agency says, would be particularly vulnerable to a shake-up in trade relations with Canada and Mexico because automakers there import auto parts and export finished cars.
North Dakota mainly exports oil and gas to NAFTA nations. For Texas and Vermont, computer and electronics products are top exports to Canada and Mexico. In Texas, chemicals are a leading export as well.
Moody's notes: "Trade-dependent states and local governments would likely see declines in income tax and sales tax revenue in the event NAFTA is terminated, although the severity of the impact would depend on how high tariffs are and how long they are kept in place."
Canada, meanwhile, has been on a “charm offensive” to remind U.S. lawmakers about the importance of trade between the two nations, the CBC reported last week. That includes Douglas George, Canada’s consul general in Detroit who serves as his nation’s lead diplomat in Indiana, Kentucky, Michigan and Ohio.
"For example in Michigan, it's the biggest two-way trade between Canada and the United States, nearly $72 billion a year," George said during a Rotary Club event in Windsor, Ontario. "There's 259,000 jobs just in Michigan depending on trade investment with Canada, nine million across the U.S. as a whole. So we're explaining why NAFTA is a benefit, why we want to keep it ... and modernize it."
NAFTA is also top of mind for state lawmakers in Idaho.
In a recent guest opinion published by Idaho Politics Weekly, Idaho State Rep. Mat Erpelding, a Democrat, and State Sen. Jim Patrick, a Republican, offered a reminder of just how much is at stake for the Gem State’s booming economy with the forthcoming NAFTA negotiations: “...[S]ince 1994, the year NAFTA went into effect, exports from Idaho companies to Canada and Mexico have shot up 800 percent. Nearly half of our farm and food exports went to Mexico and Canada last year. Idaho’s dairy exports have doubled over the last decade.”
Michael Grass is Executive Editor of Government Executive’s Route Fifty and is based in Seattle.
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