Minding The Gap: Some Goods We Buy Could Cost 75% More Without NAFTA

The trade agreement can mean fewer American factory jobs, but it also brings down the cost of the things we buy.
Posted at 5:18 PM, Jan 25, 2018

NAFTA is a savior to some and dream-crusher to others. The numbers tell a range of stories, which are all true.

For starters, the U.S. Chamber of Commerce estimates that today, NAFTA supports 14 million American jobs, 6 million based on Mexican trade, 8 million from Canada.That word — trade — is key. There are two types.

Services: transportation, travel, some intangibles. Goods: like cars, vegetables, jeans. We'll focus on this.

President Trump often slams the "trade deficit" created by NAFTA as a reason for wiping it out and starting from scratch. He says America gives away too much and gets too little. What do the numbers say? The U.S. Trade Representative Office keeps the official tally.

Mexico is the country's third-largest trading partner. In 2016, America exported $231 billion worth of goods and imported $294 billion worth. So the trade deficit, meaning the difference (the opposite would be a surplus), was about $63 billion. We bought billions more than we sold, paying no extra taxes.

With Canada, America's second-largest trading partner, exports hit $266 billion. Imports were $278 billion. This deficit was smaller at $12 billion. Is that a good or bad thing? Again, it depends.

Many new jobs have been added, but if you're a factory worker whose position moved to Mexico — it's devastating, professionally. But that same worker and all their fellow Americans, who are consumers, benefit when they go to the grocery store or the mall.

The New York Times pulled together these figures. Since NAFTA keeps tariffs — or taxes — from being added to items, they're cheaper. When we all go shopping, the bill will would spike if those tariffs were suddenly added.

Potatoes from Mexico would cost 75 percent more. A bag of potatoes on Amazon costs $11. If they're from Mexico, they'd probably jump to $19.25. Beef from Canada would cost 27 percent more.  

What about jeans? In other countries with closed off system, they're expensive. Clothing from Mexico would cost between 15 percent and 20 percent more, and so would soap — kind of important.

This is a good illustration of why economists tend to look at trade agreements from a high-level because one job, or one factory, is set against an entire nation's ability to produce, sell, work and buy at competitive levels. There are no easy solutions.