REPORT: Mexico Would Be Hardest Hit If NAFTA Collapsed

In contrast to predictions of total disaster if NAFTA ended, there are predictions that despite an economic disruption, neither Canada, the US, or Mexico would fall into a recession if the agreement was scrapped.

A new report provides a counterweight to the near-apocalyptic rhetoric surrounding the possible end of the North American Free Trade Agreement.

As negotiations get tougher, there is rising concern that the agreement could fall apart, and thought is turning to the potential impact of that scenario.

Now, Moody’s Analytics has shared their predictions about what impact that would have on the economies of Canada, the US, and Mexico.

As noted by Bloomberg, “An increase in duties would potentially hurt growth, cost jobs and spur inflation for all three nations with Bloomberg Intelligence and Moody’s Analytics predicting Mexico would be the hardest hit. But none of the countries would be tipped into recession, according to Moody’s. It forecasts most of the pain would come in the first two years after the breakdown of the deal, assuming the U.S. and Canada would work out a bilateral arrangement.”

The Chief Economist at Moody’s Analytics – Mark Zandi – says, “It will be bad for business, but it wouldn’t be cataclysmic. It will be disruptive to supply chains.”

Mexico is estimated to lose 1 million jobs, while the US would lose 250,000, and Canada would lose 125,000. However, that estimate does not include the possibility that Canada and the US would resurrect the Canada-US Free Trade Agreement, which would bring the jobs loss numbers down dramatically for Canada & the US. Mexico would take a big hit to their automotive sector – though it should be noted that Mexico’s automotive success has often come at the direct expense of jobs in Canada and the US.

Clearly, there would be a short-term disruption from the end of the NAFTA. However, Canada’s economy would survive, and it is likely that we would sign a deal with the US. Additionally, if we took actions to lower energy prices, reduce regulations, eliminate the carbon tax, and cut taxes, we could strengthen our domestic economy, build up the energy industry, and expand our exports. With those policies in place we could even gain back massive amounts of jobs in the automotive sector and other manufacturing industries. That’s why Canada’s economic “leaders” should spend less time panicking about NAFTA, and more time strengthening our economy here at home.

Spencer Fernando

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