Mexican peso falling by 13%

Trump: Are all NAFTA countries created equal?

With the first points of Trump's 100-day action plan to protect American workers being to either renegotiate NAFTA or withdraw from the deal under Article 2205, many Canadians and Mexicans are left wondering what impact this will have on trade in near future.

With Trump's statements primarily directed at America's southern neighbor, Mexico, the country has a lot to lose. NAFTA makes up the backbone of commerce and the United States is Mexico's largest trading partner. According to a 2015 report from the Congressional Research Service, exports from Mexico have increased by 600% since 1993.

This is why it was no surprise yesterday when the Mexican peso saw the largest drop since an economic crisis in 1994, initially falling by 13% when Donald Trump was officially announced president. The peso fell by 8%, with roughly 20 pesos to the dollar, its lowest value against the dollar in history. In comparison, the peso was trading at roughly 13.50 pesos to the dollar just two years ago, before the start of the election campaign.

The stock market in Mexico also fell by more than 2% on Tuesday.

Eswar Prasad, professor of trade policy at Cornell University, stressed to those concerned that they should not forget that 'NAFTA is a multi-nation treaty signed by Congress, changing it "would not be a trivial matter. It's going to be difficult to roll back trade agreements that already exist. Still, Trump could slowly strangle NAFTA by "making life potentially difficult" for firms doing cross-border business"

The next question is, for Canada anyway, are all NAFTA members created equal in Trump's plan to protect American workers? His pledges have targeted Mexico more often than Canada, who is the biggest buyer of US exports, along with being the top trading partner to dozens of American states.

Canada's trade ties with the US, seem to be more balanced and the warning of tariffs and slower growth were met with a shrug by many Canadian trade experts, saying that they largely expect business as usual.

“The range of potential actions that could be taken at the moment is very wide,” said Peter Hall, EDC vice-president and chief economist. “Elections are full of rhetoric. You never know if that’s going to turn into reality, and that’s the big dilemma at the moment. There are 35 US states that count Canada as their top export destination, meaning any trade war with Canada could cost Trump the types of jobs he pledged to save."


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