How Trump is about to make the 'worst deal ever' even worse
By Steven Mufson October 15 at 10:00 PM
President Trump has called the North American Free Trade Agreement “the worst deal ever,” but one thing might actually be worse: no deal at all. The fourth round of negotiations to revise the agreement wraps up Oct. 17, but many people close to the talks have expressed doubts that they will succeed.
If NAFTA crumbles, trade among Mexico, Canada and the United States would fall under World Trade Organization rules with modest average tariff rates and an established, if unwieldy, process for resolving disputes. But the tariff rates, although relatively low, would be higher on U.S. exports than on U.S. imports. Many trade experts say that would hurt U.S. exporters of everything from corn to auto parts and that the United States could end up with fewer jobs while paying higher prices for goods than it does.
Meanwhile, Canada and Mexico would be able to fall back on free-trade agreements they have forged with Europe recently, providing zero tariffs.
Mexican Foreign Minister Luis Videgaray told a Mexican Senate committee this week that the end of the North American Free Trade Agreement “won’t be the end of the world.” And in some ways Videgaray is right. The world of global trade has far fewer walls and stumbling blocks than it did 23 years ago, when NAFTA went into effect.
Nonetheless, even small tariff differences can have substantial effects, many trade experts say, and could upend established supply chains.
“If NAFTA ends, the tariffs the United States imposes on imports from Mexico would revert (from currently zero) to their WTO levels. For the United States, these tariffs average 3.5 percent” across all goods, Chad Bown, a senior fellow at the Peterson Institute for International Economics, said in an email.
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