Mexico: NAFTA’s bigger winner?

05.30.17

Amid President Donald Trump’s tough-sounding talk about renegotiating the North American Free Trade Agreement (NAFTA), economists and other observers have debated how potential changes could impact the U.S. economy.

Less scrutinized, according to CNBC, is how Mexico, the U.S.’s third-largest trading partner and a frequent target of Trump’s broadsides on trade and immigration, might be affected by adjustments to the 1994 trade agreement.

At least a few economists are outlining scenarios in which Mexico could emerge as an unlikely winner in the brewing debate. The discussion takes place against a backdrop of Mexican growth that’s less than stellar, but has beaten some of the more dire predictions about how the country could fare as the Trump era takes shape.

“The Mexican economy has its problems, but it has arguably been the best-performing Latin American economy in recent years,” said Mark Zandi, chief economist at Moody’s Analytics.

“It has become less dependent on the ups and downs in oil prices, and more integrated into the global supply chain. Given its young population, Mexico has a bright economic future, particularly if it is able to address its problem with crime and corruption,” Zandi added.

Indeed, citing “a more constructive mood”— one that presumably assumes NAFTA will be reformed rather than shredded — Citigroup recently upgraded its outlook for Mexico’s economy to an expansion of 1.7% this year from an earlier projection of 1.2% growth. That revision was in part “predicated ... on a more constructive assessment of what the future of North American integration might look like,” the bank’s analysts wrote in a research note last month.

“On the relationship with the U.S. there appears to have been a rethinking of trade issues within the Trump administration,” Citi said. “We now think that NAFTA will be ‘rebalanced’ but also ‘upgraded’” in ways that may prove beneficial to Mexico, the bank added. (Source: CNBC)


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