How could ending NAFTA impact Michigan?

file8741346369542President Donald Trump has called the North American Free Trade Agreement, or NAFTA, the ‘worst trade deal in history,’ saying he would like to either renegotiate the deal, or destroy it altogether.

The president has also indicated that he could impose a 20 percent tariff on goods coming into the U-S from Mexico.

Economists and local manufacturers are speaking up about the potential impacts those changes might have.

NAFTA came into force in 1994… opening up trade and reducing tariffs between the U-S, Canada and Mexico.

Dr. Abu Amin is an professor of International Finance at Central Michigan University. He said roughly 95 percent of economists agree the trade deal has had a positive effect on the U.S. economy – increasing both trade volume and wages.

“Because of NAFTA there increase in U-S trade in goods and services with Canada and Mexico. It was about $337 billion in 1983 and it grew up to $1.2 trillion in 2011.”

Amin said an increase in exports has meant more jobs in industries like agriculture and tech.

“But on the other hand we see that because of NAFTA we have seen some loss of jobs and specifically those jobs were moved to Mexico.”

The auto industry has seen the most jobs move across the southern border – Amin said exactly how many jobs were lost is up for debate, but some estimates put the number at 700-thousand.

However, Amin said getting rid of NAFTA and increasing tariffs may not have the desired effect of bringing jobs back.

“Whenever we have an increased tariff there will be less demand for our goods and that could affect our overall jobs in the U.S.”

NAFTA has had an impact on manufacturers across the United States… including large, well known companies like Ford and General Motors, and smaller automotive suppliers like American Mitsuba, which is based in Mount Pleasant.

David Martin Stevens is the senior vice president of American Mitsuba. It employs about 350 workers, making a variety of parts, including starters, for companies like Honda, Toyota, and Ford.

“We also do cooling fans, cooling fan motors. We make components that we sell to all the different Mitsuba groups.”

Beyond the main office space of the building opens up into a vast factory, alive with the sounds of manufacturing.

Stevens said each part produced here is made from smaller components that come from all around the world.

“This little part we make here, we make this little armature for a wind regulator motor, we sell that to Mexico. They finish the motor out, sell it back to us, and we sell it to four different customers in North America.”

Because of this, said Stevens, any increase in tariffs or an end to NAFTA could be disastrous to his business.

“A lot of our components come from across the pond or Mexico. So if tariffs are put on those it could be nearly catastrophic. We just have no idea yet. We’re patiently waiting to see what happens.”

Stevens said that by using parts from around the world, companies can reduce costs, allowing cars to be priced more competitively. But that also means factories producing parts for lower cost cars often move to cheaper locations – like Mexico.

Stevens said he understands the desire to bring jobs back to the U-S, but he doesn’t think the president’s approach is the way to do it.

“Not a quick fix, a lot of the stuff that has moved isn’t coming back. The textile industry you can’t just say ‘bring it back from China or India or somewhere else’ it’s not going to. I understand President Trump and other people talking about jobs and america first but you can’t be isolationist to an extreme because it just doesn’t work.”

But not everyone is as concerned with the president’s approach.

Harry Lieber is with the Central Michigan Manufacturers Association. He said it’s hard to say what will happen in the near term, but in the long term he’s optimistic.

“There will however be some buying decisions made from companies currently buying out of Mexico that will be looking and saying ‘am I in the right position buying from mexico or should I be buying locally?’”

Lieber said he supports the president’s position.

“We like Trump’s position on trying to bring more work back into the country. We think it’s going to be good for the overall U-S economy.”

Others, like international finance professor Abu Amin, say that blowing up the NAFTA agreement would likely be bad for the U-S economy. He warns it could have a host of unintended consequences…

“We may not see those lost jobs back to our economy again. We have done a lot of exporting so if we are coming out of those trade blocks what will happen to those exports what will happen to those jobs? It’s like saving one can also jeopardize loss to other industry sectors.”

But until President Trump moves to reopen NAFTA negotiations or impose tariffs, experts in both finance and manufacturing say everything is just speculation… and the true consequences won’t be fully known until a plan is unveiled.