Which American producers would suffer from ending NAFTA?

By THE DATA TEAM

MEXICO sells America more goods than America sells Mexico, and it enrages President Donald Trump. His solution is to rewrite the North American Free-Trade Agreement (NAFTA), which allows goods to flow across the Rio Grande free of tariffs. America sends almost $240bn in goods to Mexico every year. Were NAFTA to collapse, many Americans would pay a price—and not just as consumers. Which American producers would suffer?

Suppose, optimistically, that each side followed the rules of the World Trade Organisation (WTO). Then, tariffs would revert to WTO rates. By matching these tariffs to trade flows for about 5,000 goods, The Economist has estimated which states’ exporters would be worst-affected by the levies.

Farm states face the highest charges. Whacking tariffs on malt, potatoes and dairy products would cause Idaho’s exports to Mexico to incur an average levy of nearly 15%. Some products would be particularly badly hit. In 2015 Iowa’s farmers shipped $132m of high-fructose corn syrup to Mexico. Without NAFTA, Mexico would slap a tooth-aching 100% tariff on the stuff.

Yet farm states are lucky to have plenty of customers elsewhere. Idaho’s exports to Mexico are worth less than half a percent of its GDP. Other state economies are more tangled up with Mexico’s. These places should worry about NAFTA’s fate despite facing low average tariffs.

Among this group, Texas stands out. It faces an average tariff of only 3%, but its exports to Mexico are worth nearly 6% of its GDP (compared with 1.3% nationally). In total, as a percentage of GDP, Texas would pay more than any other state. Michigan is another with reason to worry. Its exports of cars and parts would attract tariffs averaging only about 5%. But with such shipments totalling $4.1bn, the bill would be painfully large.

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