Say Donald Trump kills NAFTA. Here’s what experts say will happen to Canada: Analysis
The auto industry, the agriculture industry, and a whole bunch of others would be harmed by a termination of the North American trade pact. But the Canadian economy would not be crippled, economists say.
WASHINGTON—The end of NAFTA would be bad but far from devastating for the Canadian economy, reducing growth but not stopping it, several economists have concluded.
With a big dose of caution.
Experts are hesitant to make grand predictions because there are so many unknowns involved. One of them is that nobody knows what U.S. President Donald Trump would do after striking the death blow.
Once strictly hypothetical, the question of what termination would mean for Canada has taken on increasing urgency in boardrooms around the country as North American Free Trade Agreement negotiations have faltered on account of Trump’s protectionist demands. The fifth round of talks began Friday in Mexico City.
Trump could potentially terminate the deal, as he has repeatedly threatened to do, and simply move on to other matters. Or he might throw a “tariff tantrum,” in the words of economists at the Royal Bank of Canada, starting a trade war by slapping import duties on all sorts of Canadian goods.
With a big dose of caution.
Experts are hesitant to make grand predictions because there are so many unknowns involved. One of them is that nobody knows what U.S. President Donald Trump would do after striking the death blow.
Once strictly hypothetical, the question of what termination would mean for Canada has taken on increasing urgency in boardrooms around the country as North American Free Trade Agreement negotiations have faltered on account of Trump’s protectionist demands. The fifth round of talks began Friday in Mexico City.
Trump could potentially terminate the deal, as he has repeatedly threatened to do, and simply move on to other matters. Or he might throw a “tariff tantrum,” in the words of economists at the Royal Bank of Canada, starting a trade war by slapping import duties on all sorts of Canadian goods.
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The tantrum scenario is “remote,” RBC says and other experts agree, given the legal and political constraints Trump faces. There are two things that experts believe are far more likely.
The first possibility is that Trump allows the Canada-U.S. Free Trade Agreement, which NAFTA replaced in 1994, to come back into effect. Since that agreement is similar to NAFTA, though it excludes Mexico, the overall impact of NAFTA itself going away would likely be small.
The second possibility — the one that Canadian companies are planning and bracing for — is that Trump decides to kill the Canada-U.S. deal as well. In that case, long-abandoned tariffs could be brought back into force.
The first possibility is that Trump allows the Canada-U.S. Free Trade Agreement, which NAFTA replaced in 1994, to come back into effect. Since that agreement is similar to NAFTA, though it excludes Mexico, the overall impact of NAFTA itself going away would likely be small.
The second possibility — the one that Canadian companies are planning and bracing for — is that Trump decides to kill the Canada-U.S. deal as well. In that case, long-abandoned tariffs could be brought back into force.
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