NAFTA, the oft-maligned North American Free Trade Agreement, which eliminates barriers to trade amongst the US, Canada, and Mexico, is under threat given President Donald Trump’s statements that the agreement needs changing—and that he’ll scrap the whole thing if he can’t renegotiate terms in a way that, well, you know: “makes America great again.”
Should NAFTA be significantly changed—or scrapped entirely—many industries, including the auto industry, will be plunged into uncertainty because they rely so heavily on manufacturing in Mexico.
But we’re pleased to say your boilermaker habit may not be at risk.
That’s because fewer tequila makers are using the benefits offered by NAFTA to bring goods into the US these days. According to calculations made by Bloomberg based on Census Bureau data, back in 1998, 66 percent of imports from Mexico and Canada into the US were made under the terms of the agreement, but last year only 51 percent were.
The reasons for this change are unclear. Could it be the red tape or material-source requirements involved in NAFTA, or the ability of companies to bring goods in through the terms of the World Trade Organization, which has lowered and eliminated many applicable tariffs? No one knows for sure.
Christopher Wilson, deputy director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, told Bloomberg, “The fact that a major percentage of US-Mexico trade occurs outside of the NAFTA framework is clear evidence that changes to or even the elimination of NAFTA would not destroy US-Mexico trade, or do anything approximating that. That said, NAFTA is important.”
NAFTA is especially essential for the current globalized manufacturing model for the car industry, which does heavily bring in imports under its provisions—in fact, around 94 percent of cars and car parts brought into the US from its neighboring countries come in through NAFTA. But beer and tequila companies are using the agreement only 8 percent of the time. What’s more, tequila comes in free for all World Trade Organization members.
So, breathe easy, friends. Your tequila is safe, at least at the moment.
That is, unless Trump decides to mess with the terms of the World Trade Organization. Or just puts a flat 20-percent tariff on all Mexican goods to help build his promised anti-immigrant wall—a threat he made recently.
Maybe a constant state of anxiety is appropriate these days, after all. So, feel free to worry, but know this: A shot of tequila may help.