Mexico's election of leftist candidate Andrés Manuel López Obrador as president may have portended more trade trouble between the two countries, but businesses see President Trump as the greater threat on North American Free Trade Agreement (NAFTA).
López Obrador, known as AMLO, opposed NAFTA at the time it was signed. But like many on the Canadian left, he has since come around as Mexico’s economy opened and the conventional wisdom in the country saw the deal as central to its economic prospects.
“In both countries, the center-left parties that originally opposed NAFTA in 1994 came out to defend it. Perhaps not with great enthusiasm, but they defend it,” said Joydeep Mukherji, who leads the Americas Sovereign Ratings section at S&P Global. “The bad news is that the overall fate of the NAFTA negotiations remains up in the air.” Trump, for his part, has threatened to withdraw the United States from the agreement, which he routinely describes as one of the worst deals the U.S. has ever entered into. It’s part of a nationalist trade agenda that has also included the imposition of tariffs on steel and aluminum imports. Trump used the Section 232 law to impose tariffs on those imports, claiming they threatened national security. He’s considering a similar argument to slap steep import taxes on automobiles.
While businesses worried about some of López Obrador’s economic plans, his election has prompted muted concern over NAFTA. “AMLO didn’t run on a NAFTA-friendly platform, but NAFTA was never part of the campaign, and he’s on several occasions expressed support for NAFTA and its renegotiation,” said Monica DeBolle, senior fellow at the Peterson Institute for International Economics.