While the sixth round of negotiations among trade officials from Canada, Mexico and the United States proceeded in Montreal last week on the North American Free Trade Agreement (NAFTA), the nonpartisan Business Roundtable released an economic analysis concluding that termination of NAFTA would have a significant net negative impact on the U.S. economy and employment. The analysis, prepared by Trade Partnership Worldwide, LLC, quantifies the harmful impacts of NAFTA withdrawal by examining how the re-imposition of “most-favored-nation” tariffs on U.S. trade with Mexico and Canada would affect the U.S. economy. The analysis also shows that withdrawing from NAFTA would:

  • Result in the net loss of 1.8 million U.S. jobs within the first year.
  • Reduce U.S. exports to Canada and Mexico by 17.4 percent each and lower U.S. companies’ global exports by 2.5 percent.
  • Diminish U.S. households’ purchasing power by almost $654 per household due to higher prices and lower wages caused by increased tariffs.
  • Shift economic activity away from North America and toward U.S. competitors, including China, which would experience a GDP increase of 0.2 percent and a net employment increase of 2 million jobs.

Overall, the analysis concludes that termination would re-impose high tariff costs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive, making U.S. businesses less competitive in these markets.