On the campaign trail, Donald Trump made NAFTA a central focus of his platform, frequently vowing to renegotiate or pull out of the deal for the United States' benefit. Despite the repercussions that could entail, his threat of withdrawal was not necessarily an empty one. As president, Trump will have wide-ranging powers over U.S. foreign policy. NAFTA's terms, moreover, allow for a country to unilaterally withdraw from the treaty. Nevertheless, withdrawing would be easier said than done. The U.S. and Mexican economies have become so integrated that the tariffs imposed in the wake of a withdrawal would probably raise prices for consumers in both countries and reduce cross-border trade.
Declining trade could also have dire effects on U.S. states such as Texas and Arizona that do considerable business with Mexico — and, by extension, on their representatives in Congress (most of whom are members of Trump's Republican Party). The sheer level of business disruption that a hasty unilateral withdrawal would cause in those states may deter lawmakers from backing such an initiative and could alienate their support on future policy proposals, as well. This is something Trump will likely take into account as he crafts his trade policy toward Mexico.
At the same time, Trump has his support base to consider. The president-elect's victory relied heavily on voters in states that have lost the manufacturing jobs that once underpinned their prosperity, such as Ohio, Michigan, Wisconsin and Pennsylvania. If he hopes to maintain their support in the 2020 presidential election, Trump may have to make good on at least some aspect of his promise to overhaul NAFTA. To that end, his administration could opt for a partial renegotiation of the trade deal as a way to appease his supporters while minimizing business disruptions and congressional resistance. Canada, NAFTA's other signatory, has already indicated that it is open to discussing the deal's terms again, and in the wake of Trump's election, Mexico appears hesitant to challenge the United States.
The new president could try to engage Mexico in a discussion aimed at amending or further enforcing NAFTA's regional value content stipulations, which dictate the amount of content from member countries that goods traded under the agreement must contain. If all parties agreed to raise the regional value content requirement on certain high-value products such as automobiles, the United States, as the bloc's largest manufacturer, could benefit in the long run. A renegotiation of this sort would also be less disruptive, sparing U.S. companies with operations in Mexico the sudden negative consequences that a withdrawal from NAFTA would bring.
