Renegotiating NAFTA: Pros and cons for Canada and Mexico

The research simulates the economic effects of a 20 per cent tariff hike and a border carbon tax across North American industries. It finds that while the U.S. would face the largest absolute GDP and welfare losses, Canada would experience the highest relative decline in employment. Crucially, the study concludes that trade barriers are ineffective for reducing carbon-intensive energy output or greenhouse gas emissions and may actually reduce renewable energy use in favor of liquefied natural gas.

• A 20 per cent tariff increase would result in the United States experiencing the largest absolute economic losses, with a GDP decrease of approximately USD 3.4 billion per year and welfare losses of roughly USD 5 billion.
• The Canadian steel sector would see the most significant industry loss with a 13 per cent decline in output, compared to a 6.5 per cent decline in Mexico.
• Trade barriers are an ineffective tool for climate mitigation; they would not measurably reduce greenhouse gas emissions or carbon-intensive energy output in oil and coal. Furthermore, such barriers would lead to a decrease in renewable energy and an increase in liquefied natural gas (LNG) usage, necessitating new infrastructure investments.
• Canada would experience the highest relative decline in employment due to its reliance on the U.S. market and lack of economic diversification.
• A border carbon tax of USD 40 per tonne on electricity and export-intensive goods would provide some offset to the losses caused by a tariff hike, though it would not fully compensate Canada and Mexico. The largest overall gains in this specific scenario would be for Mexico.

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} }