On the campaign trail, President Donald Trump called the North American Free Trade Agreement “one of the worst things to happen to manufacturing in the United States.” Since the election, his top aides have suggested renegotiating it will be an early priority.
But for the plastics industry, reopening NAFTA could carry significant risk.
That's because the U.S. plastics industry, in sharp contrast with much of the rest of manufacturing, has a trade surplus with Mexico.
Trade groups like the Plastics Industry Association say the surplus is “directly attributable” to NAFTA, which it said “has benefited American companies and American workers greatly ever since it entered into force.”
The head of the association, Bill Carteaux, said in January that concerns about risks to its export position were so high the group would be “fighting a rear-guard action on trade issues, like doing our best to keep the White House from unwinding NAFTA.”
U.S. plastics companies have an $11 billion surplus with Mexico, and balanced trade with Canada. But the Trump administration points to a larger figure in its critiques of NAFTA: the $60 billion trade deficit in manufactured goods that the United States has with Mexico.
It argues that NAFTA has cost the United States 850,000 jobs, and called it an example of a “notably” bad trade deal.
Those who follow trade policy say it's not at all clear what the Trump administration will do.
Trump has threatened to impose tariffs or a 20 percent border tax, in part to pay for a new wall on the U.S.-Mexico border. That worries industry lobbyists and business groups along the border, who think tariffs could increase prices and disrupt complex supply chains. They worry that the Trump administration's plans will be too blunt.
“Renegotiating NAFTA is a good idea in theory but it will have broader implications than people realize,” said Charles Sholtis, CEO of Plastic Molding Technology Inc. in El Paso, Texas. “I'm in favor of renegotiating NAFTA. But to go out and take a machete and slap on a 20 percent tariff is a huge mistake.”
Analysts say it's possible that a NAFTA rewrite could include more measured ideas, like changing rules of origin on what constitutes North American content. But most of public focus so far has been on more dramatic steps like tariffs and taxes.
“We just don't know what the policies will be,” said Robert Atkinson, president of the Information Technology & Innovation Foundation, at a Jan. 31 forum on manufacturing policy in Washington. “We'll just have to see how it plays out.”