Just Seven Percent of Economists Say NAFTA Exit Would Trigger a Recession

Canadian Prime Minister Justin Trudeau will meet US President Donald Trump at the White House on October 11, 2017, with negotiations on the NAFTA underway nearby in the Washington suburb of Arlington, Virginia

Very few economists think the economic consequences of leaving NAFTA would involve the U.S. entering a recession.

Just seven percent of economists surveyed by the Wall Street Journal said the U.S. economy would weaken enough to trigger a recession in the event the U.S. withdraws from the trade agreement. Eleven percent said withdrawal would have no effect at all.

Eighty-two percent of the economists surveyed by the Wall Street Journal believe that withdrawal would result in slow economic growth. But at least part of this would not be due to the U.S. withdrawal but to retaliatory tariffs that economists think would be imposed by Canada and Mexico. If those were not as severe as economists expect, any hit to U.S. economic growth would be attenuated.

Just as entering NAFTA had only a small effect on the U.S. economy overall but had hugely significant effects on certain areas and industries, withdrawal would likely play out in a similar way. Overall growth might be lower than it would have been but many communities would likely see outsized benefits as companies moved production into the U.S. to avoid tariffs.

The indirect effects of withdrawing from NAFTA, including the message such withdrawal would send to China about the seriousness of the U.S. government’s commitment to reduce trade deficits, may even outweigh the drag from reduced trade flows with Canada and Mexico.

The economics profession has a well-known bias against Donald Trump and his economic policies. Prior to the election, 55 percent of economists surveyed by the National Association for Business Economists said that Hillary Clinton would do the best job of managing the economy. Just 14 percent picked Trump, one percentage point less than picked Libertarian Party nominee Gary Johnson.

Similarly, only 6 percent of economists in the NABE survey supported rejecting the Trans-Pacific Partnership, while 47 percent said it should be adopted in its then current form and 30 percent thought it should be adopted with some modification.



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