Chart of the Week

Sources: U.S. Census Bureau, Bloomberg, as of November 11, 2019. Monthly data is through September 30, 2019. This chart was excerpted from the November Policy, Politics & Portfolios report.

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Since NAFTA (North American Free Trade Agreement) was introduced in 1994, North American trade and cross-border investment rose from $290 billion in 1993 to more than $1.1 trillion by 2017. We believe that the U.S.-Mexico-Canada Agreement is an important modernization to NAFTA—and that the new plan will continue to build stronger economic linkages among the U.S., Canada, and Mexico.

The new deal should benefit consumers by further increasing North American trade, especially in agricultural products. Following the new deal’s requirements, more content of manufactured goods will originate from the U.S.—and Mexican manufacturing wages will rise. Therefore, autos, textiles, and apparel made or assembled in Mexico would become more expensive for U.S. consumers. In our view, these changes could drive further U.S. manufacturing and related jobs overseas.

The U.S. is likely to ratify the deal in 2020, and we expect Canada to follow with ratification shortly afterward. Overall, we believe the deal should benefit consumers; however, we don’t expect it to increase broad U.S. economic output. A study by the International Monetary Fund projects no net benefit to the U.S. economy, as the U.S. trade deficit and manufacturing job losses would offset gains to sectors such as dairy.

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