Jan 26, 2017 - Economy & Business
Facts Matter

NAFTA blew up the U.S. trade deficit with Mexico

The issue:

President Trump has called NAFTA "the single worst trade deal ever approved in this country" and tweeted that it's "been a one-sided deal from the beginning."

The facts:

The North American Free Trade Agreement went into effect in 1994 and allowed for the free exchange of goods between the U.S., Canada and Mexico. The removal of trade barriers led to a tripling of trade, but also a sharp in increase in the trade deficit. Here's a graph of the U.S. deficit with Mexico:

Data: U.S. Census Bureau; Chart: Lazaro Gamio / Axios
Data: U.S. Census Bureau; Chart: Lazaro Gamio / Axios
Why it matters:

Trump has vowed to renegotiate NAFTA to give U.S. workers a better deal. Eliminating NAFTA would mean more expensive goods for American consumers, and maybe more domestic manufacturing jobs. But the trade deficit is a lousy measure for any of this. More exports means more American jobs. You'd rather have $10 worth of exports and $15 worth of imports than $8 of both and no trade deficit. If higher imports are the product of unfair trade practices, and those products could be reasonably made here, shrinking the trade deficit makes sense, but not if shrinking the trade deficit comes at the expense of export growth.

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