‘Incredible’ Recession
If Trump does decide to withdraw from the 23-year-old trade agreement, industries in both countries could suffer and the U.S. could enter “an incredible economic recession,” according to Jason Marczak, director of the Atlantic Council’s Latin America Economic Growth Initiative.
“Over the last two decades, U.S.-Mexico commercial relations have deepened across both countries,” he said.
The interdependence is most evident in manufacturing supply chains, where parts coming from the U.S. or Canada are often assembled in Mexico, where the cost of labor is cheaper.
This has led to a blurring of economic lines between the three countries. About 40 percent of the content of Mexican exports to its northern neighbor actually originate in the U.S., according to a 2010 National Bureau of Economic Research working paper.
And roughly 5 million American jobs depend on trade with Mexico, according to Christopher Wilson of the Mexico Institute at the Woodrow Wilson International Center for Scholars. The positions are spread across many states and industries, from car-parts factories that supply Mexican auto plants to U.S. farms that grow the barley that goes into Mexican beer.
But most economists agree the automobile industry would be among the sectors most affected by a trade war between the U.S. and Mexico. The flow of Mexico-made passenger cars and light trucks into the U.S. reached more than 2 million vehicles in 2015, when Mexico became the largest source of imported autos, according to data from the International Trade Administration, part of the U.S. Department of Commerce.
Some 1.58 million Mexican-made passenger vehicles worth $29.4 billion were imported in the first nine months of 2016, the latest data available.
“Mexico is easily the most important country for the U.S.,” said Antonio Ortiz-Mena, a senior adviser at Albright Stonebridge Group who worked with Mexico’s original Nafta negotiating team. “The U.S. and Mexico are inter-dependent countries. If they cooperate, they are both better off. If they don’t cooperate, they are both worse off.”
This article was provided by Bloomberg News.