Posted: March 24th, 2023

Repealing NAFTA and its Effect on Mexico’s Economy

The North American countries, specifically Mexico, Canada, and the United States signed the NAFTA trade pact. The deal came into play in 1994 although its terms were gradually implemented through until 2008. The agreements focused on eliminating tariffs on the products from each of the three countries. NAFTA has played a significant role in changing the economic relations in the North America. The agreement enjoyed political backing through the negotiated made by the Republican President Bush and implemented during the Democratic President Clinton tenure. However, during his campaigns, Donald Trump greatly targeted the free trade agreement, citing that it diverted the U.S. manufacturing jobs to Mexico, hence leaving Americans jobless. The President has called for renegotiation or withdrawal from the agreement. Therefore, it is imperative to discuss the effects of repealing NAFTA deal on the Mexican economy.

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NAFTA has played a significant role in boosting the Mexican exports to the United States where the farm produces have tripled after the deal was implemented. The agreement inspired trade between the member countries and fortified investments. However, Mexico greatly benefited from the deal as it is a developing economy, whereas the US and Canada had little impact since they are already developed nations (Burfisher et al. 127). Additionally, manufacturing jobs have been created in Mexico. Therefore, if the NAFTA deal collapses the Mexican economy will suffer major setbacks since most of their products will not have a ready market given that the U.S. consumes about 80 percent of Mexican products. The withdrawal from the pact will increase the number of illegal migrants to the U.S., which had reduced significantly due to the cross-border trades that had created more employment opportunities (Burfisher 130). Thus, it is evident that if the United States pushes on with its plan to scrap NAFTA, Mexico will experience economic challenges.

According to McBride and Sergie, the United is ready to renegotiate the NAFTA deal or withdraw from the agreement. In fact, if the NAFTA deal is scrapped there might be negative effects on both nations since they depend on one another regarding exports and imports (1). Mexico and Canada import more than a third of the U.S. products. Indeed, it is clear that NAFTA has had both positive and negative effects. In fact, critics blame NAFTA for the wage stagnation in the US, job losses, and the increased rate of unemployment (Cuevas, Messmacher, and Werner 476). Most of the United States manufacturing firms have moved production activities to Mexico based on the availability of cheap labor, rendering the Americans jobless. The increased imports from Mexico have also contributed to the loss of jobs in the US.

As it is evident from the discussion, NAFTA has eliminated tariffs charged on the goods from either country. However, scrapping NAFTA as stated by the American President will have negative effects on the manufacturing sector in Mexico, but might benefit the agricultural sector. America withdrawal from NAFTA will render most of the Mexicans who work in the manufacturing industries jobless. Consequently, the U.S. will not have a ready market for its goods since it is evident that Mexico is a major importer of American products. The move will lead to illegal Mexican immigration to America, seeking better opportunities across the border. In fact, it is clear that United States withdrawal from NAFTA will have significant effects on the Mexican economy, as well as on the U.S. economy.

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