Donald Trump said he will get tough on Mexico and China starting Day 1 of his administration.
Top of Trump’s wish list is to renegotiate or “terminate” NAFTA — the North American Free Trade Agreement. He also wants to slap a 35% tax on goods, such as Ford ( ) cars, that are made in Mexico and sold in the U.S.
Trump has called NAFTA the “worst trade deal in history,” and blames it for the loss of manufacturing jobs in America’s Rust Belt — states that helped catapult him to victory last week.
Here’s what you need to know about NAFTA.
What is NAFTA?
It is a trade agreement between Canada, Mexico and the United States that was signed into law in 1994 under President Bill Clinton. The framework of the deal was first drafted under President Ronald Reagan in 1987.
NAFTA essentially eliminated almost all tariffs among the three nations, allowing for the seamless flow of goods and supplies across borders. Today, approximately $1.4 billion in goods cross the U.S.-Mexico border every day.
NAFTA also makes it easy for companies to move operations from the U.S. to Mexico.
Can Trump tear up NAFTA without Congress?
Yes. The President has the authority to withdraw from NAFTA under the rules of the agreement. He just has to give Canada and Mexico six months notice.
Has America lost jobs to Mexico because of NAFTA?
Yes, jobs have been lost. But it’s not that simple, because there are also millions of U.S.-based jobs that depend on NAFTA.
The Economic Policy Institute estimates that about 800,000 jobs were lost to Mexico between 1997 and 2013. However, a nonpartisan report by Congress published in 2015 found “NAFTA did not cause the huge job losses feared by the critics.” And there’s analysis that shows America has lost more jobs to machines and automation than to Mexico.
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