The White House has its sights set on reworking NAFTA, the North American Free Trade Agreement. However, what was once thought of as an easy renegotiation has caused increased tensions between the United States, Mexico, and Canada. If all parties are at an impasse, renegotiating NAFTA could have an impact on retail, commerce in general, and could cause a major loss in revenue for the trucking industry.
NAFTA And Tariffs
When NAFTA was first implemented, the aim was to reduce or at least eliminate tariffs between countries in North America. For the most part, NAFTA actually increased commerce across both borders, which ended up generating a lot of revenue for the trucking industry. Something as simple as avocado imports created roughly 19,000 jobs in the United States. Because of NAFTA the trucking industry has seen an increase of $6.5 billion in annual revenue, and over 30,000 truckers rely on contracts which were made because of the agreement.
Walking Away From The Table
While negotiations over the past year have been designed to make things even more favorable across the board, the United States wants more reforms to encourage more domestic production. Creating more jobs within the United States is a great goal, but the existing regulations on certain industries within our borders would actually increase the cost of goods and raw materials, as opposed to importing them directly from Mexico and Canada. This impasse has seen those pushing for the reform threatening to walk away from negotiations and even withdraw from NAFTA completely.
The Ripple Effect
If the United States remains firm in its stance, the results in either direction could greatly impact the trucking industry. If the reforms for domestic production are passed, then the cost of materials and produced goods could rise, which might mean that fewer customers will be making purchases within our borders. The other side of this is that domestic production might mean ending long-standing contracts with Mexico and Canada. If the United States withdraws completely from NAFTA, the results are not much better. The trucking industry stands to lose over $6 billion in annual revenue, which could translate to layoffs until more domestic contracts are secured.
We do not know how the NAFTA negotiations will turn out, and the tension within the trucking industry will remain high until a resolution is reached. As always, Express Freight Finance will continue to report on NAFTA reforms as they are made available.