In Mexico, and worldwide, uncertainty is growing over the trade policy that the US President-elect, Donald Trump, will define and, in particular, over his desire to amend the agreements reached in the North American Free Trade Agreement. And, for two reasons, this is not trivial. First, because the President has the unilateral power to withdraw from the agreement, no matter how much Congress or private-sector legal battles might try to prevent it. Second, because the economic impact would be particularly painful for Mexico, which has benefited from the Agreement with an increase in trade of more than 115% since it was signed, but also for the rest of the world due to the business disruption that this decision would cause.
The concern is real, and it is understood that the uncertainty caused by these statements is generating strong volatility in the Mexican market. However, as premature as it may be to speculate about what may happen in the future, I have the impression that Trump’s response will be more moderate than we are imagining, for different reasons. First, the US economy and Mexico (and Canada) are so integrated that an increase in tariffs would likely raise the price of goods in both countries, reduce cross-border trade between them and, as a result, employment opportunities. US goods exports to Canada and Mexico account for 35% of the total.
In addition, a reduction in trade between countries would affect many US states, in particular Arizona, New Mexico, Michigan and Texas, which exchange more than 30% of the goods they produce with Mexico; therefore, their representatives in Congress (most of whom are members of the Republican Party) would try to mitigate any decision related to the Agreement.
The third argument rests on a more comprehensive perspective. Since the early years of President Obama, which coincided with the years of the international financial crisis, the US chose to rebuild its global leadership by accumulating resources and being less dependent on the rest of the world—something that aligns with Trump’s aim, although this time expressed in a more abrupt tone.
