Cost to Canada if Trump administration terminates NAFTA would be “modest,” not disastrous: report

June 29, 2017

OTTAWA—New research from the Canadian Centre for Policy Alternatives reveals that a potential U.S. withdrawal from the North America Free Trade Agreement (NAFTA) would not have a major impact on tariffs on Canadian exports to the U.S. This means Canada’s hand at looming NAFTA renegotiations is stronger than often assumed.

In fact, if the unpredictable U.S. Trump administration made good on repeated threats—issued as recently as April—to terminate NAFTA, reverting to World Trade Organization (WTO) rules and tariff rates would mean only a “modest” speedbump for Canadian exporters, according to a new report co-authored by Canadian economist Pierre Laliberté and CCPA senior trade researcher Scott Sinclair. 

Their report finds that such a move would mean at most US$4.2 billion in additional tariff costs for Canadian exporters, or 1.5% the total value of Canadian exports to the U.S. (2016 figures). 

“If the U.S. were to withdraw from NAFTA, the cost to Canada of reverting to WTO rules would be fairly modest. By no means would Canada-U.S. trade come screeching to a halt as alarmists suggest,” says Sinclair. 

While a termination of NAFTA would certainly be disruptive—and would hit certain sectors, like textiles, apparel and pickup trucks, harder than others—it wouldn’t have a disastrous impact on overall Canada–U.S. trade.  

“Canada can afford to stand up to any bullying by the Trump administration,” adds Laliberté. “If a revamped ‘America First’ NAFTA is a bad deal for Canada, we can safely walk away and fall back to WTO tariff rates.”   

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What is the NAFTA advantage? Putting the tariff impacts of a Trump termination in perspective is available for download on the CCPA website.

For more information or to arrange an interview, please contact Alyssa O’Dell, CCPA Media and Public Relations Officer, at alyssa@policyalternatives.ca,  613-563-1341 x307 or cell 343-998-7575. 

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