Renegotiating NAFTA: Pros and cons for Canada and Mexico

This research paper uses an economic trade model to simulate the impacts of a 20 per cent tariff increase in North American energy, steel, cement, and automobile industries, alongside the potential effects of a border carbon tax, in the context of NAFTA renegotiations.

• A simulated 20 per cent tariff hike would result in the United States experiencing the most significant absolute economic losses, with a GDP decrease of roughly USD 3.4 billion per year and welfare losses of approximately USD 5 billion.
• The Canadian steel sector would face the most severe industry loss under a 20 per cent tariff hike, with output declining by approximately 13 per cent, while Mexico's output would decline by 6.5 per cent.
• Trade barriers would be ineffective at reducing carbon-intensive energy output or greenhouse gas emissions. Instead, such barriers would lead to a decrease in renewable energy and a shift toward increased liquefied natural gas (LNG), necessitating new infrastructure investments.
• A 20 per cent tariff hike would cause widespread employment losses across several sectors: in the energy sector, the U.S. would lose 600,000 jobs, Mexico 260,000, and Canada 120,000; in the auto industry, Mexico would lose 800,000 jobs, the U.S. 750,000, and Canada nearly 150,000.
• The implementation of a USD 40 per tonne border carbon tax on electricity and export-intensive goods would benefit Mexico the most, followed by Canada and the U.S. While this would not fully offset the losses from a general tariff hike, it would recover at least half of those losses.

APA

Narayanan,, V. J. (2017). Renegotiating NAFTA: Pros and cons for Canada and Mexico. International Institute for Sustainable Development. https://www.iisd.org/articles/policy-analysis/renegotiating-nafta-pros-and-cons-canada-and-mexico

Chicago

Narayanan,, Veena Jha,Badri. Renegotiating NAFTA: Pros and cons for Canada and Mexico. International Institute for Sustainable Development, 2017. https://www.iisd.org/articles/policy-analysis/renegotiating-nafta-pros-and-cons-canada-and-mexico.

Wikipedia

{{cite report |last1=Narayanan, |first1=Veena Jha,Badri |title=Renegotiating NAFTA: Pros and cons for Canada and Mexico |publisher=International Institute for Sustainable Development |date=25 September 2017 |url=https://www.iisd.org/articles/policy-analysis/renegotiating-nafta-pros-and-cons-canada-and-mexico |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{narayanan2017renegotiating, author = {Narayanan,, Veena Jha,Badri}, title = {{Renegotiating NAFTA: Pros and cons for Canada and Mexico}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = sep, url = {https://www.iisd.org/articles/policy-analysis/renegotiating-nafta-pros-and-cons-canada-and-mexico}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }