If U.S. President-elect Donald Trump succeeds in his threat to eliminate the North American Free Trade Agreement, it could chop nearly 3 percent off Mexico’s gross domestic product, the head of the U.N.’s Latin American economic arm said on Wednesday.
That threat, combined with various other pledges by Trump to battle Mexico over trade, investment, and jobs have pushed a growing number of companies operating in Mexico to put expansion plans on hold until Trump fleshes out his policies.
“We have estimated that if NAFTA were eliminated in its totality – taking into account second-order effects – the GDP fall could be around 2.7 percent,” Alicia Barcena, executive secretary of the U.N.’s Economic Commission for Latin America and the Caribbean, said during a presentation at the body’s headquarters in Chilean capital Santiago.
“So there you have some of the risks that could be important, and could even bring the Mexican economy into recession.”
Around 85 percent of Mexican exports by value are delivered to NAFTA trade partners, the United States and Canada.
The commission predicted the economies of Latin American and the Caribbean would grow 1.3 percent in 2017, after contracting by an average of 1.1 percent in 2016. It said the economy of Mexico would grow 2 percent in 2016 and 1.9 percent in 2017.