In 1991, the US, Canada and Mexico signed the free trade agreement NAFTA. Back then that was an influential and important step for overall trade. The closely integrated value chains among the 3 countries meant NAFTA had a big influence on productivity for all three.
For 20 years, efficient production networks were developed cross-border: the production process for finished goods was divided among the players and completed in many single steps. In the process, intermediate products crossed borders often several times.
Effects of Withdrawing from NAFTA
Raising import tariffs for goods imported into the US by terminating NAFTA would mean higher prices for imported Mexican or Canadian products for US consumers and businesses. The result: decreased demand for Mexican and Canadian products and lower output of these products, leading to lower employment and lower incomes in all 3 countries.
See the full story in the first video of our series GED insights that deals with US-protectionism and its results:
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