Obviously, trade agreements and trade deficits have been the subject of much political debate of late, with President Trump long promising, for example, to either pull out of or renegotiate the NAFTA free trade agreement between the US, Canada, and Mexico - though more recently he has dialed back that rhetoric quite a bit.
All of which of course begs this question: What has the impact of NAFTA really been?
The graphic below, from the Wall Street Journal, sheds light on that topic from one angle, the change in the US trade balance with each country before and after NAFTA:
As can be seen, the US trade deficits with both Canada and Mexico started rising almost immediately after NAFTA went into effect in 1994, largely peaking around 2006-2010, SCDigest suspects driven in large part from rising oil prices at that time. In recent years, the trade deficit with Canada has dropped sharply, again likely due to falling oil prices and a decrease in US oil imports overall as a result of the boom in fracking oil output domestically.
Meanwhile, the deficit with Mexico has stayed strong, coming in around $65 billion in 2016, as automakers, aerospace companies and more do indeed move production south of the border.
But in fairness, overall trade - and US exports - have grown over this time. Exports of goods to Mexico in 1993, for example, were about $41 billion, and more than five times that at $231 billion in 2016.
So, lots of farmers and others that are enjoying that large export market will be angry indeed if changes to NAFTA impact their sales to Mexico.
It is a tight rope to walk indeed.
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