Trump is reportedly considering pulling out of NAFTA — here's where Mexico could get hit
(An employee works on the assembly line at the Volkswagen (VW) automobile manufacturing factory in Puebla August 12, 2010. Puebla, which will manufacture over half a million vehicles every year, is VW's largest factory in the Americas and one of the largest worldwide.Imelda Medina/Reuters)
The Trump administration is considering an executive order on withdrawing the US from NAFTA, Politico reported on Wednesday citing two White House officials.
A draft order, written by Peter Navarro, the head of Trump's National Trade Council, in close cooperation with White House chief strategist Steve Bannon, has been submitted for the final stages of review and could be released late this week or early next week, according to Politico.
The contents of the draft executive order are unclear at this stage, but it's worth examining which sectors in Mexico do the most business with the US.
Back in early January, Neil Shearing, the chief emerging markets economist at Capital Economics, shared a chart in a note to clients of the top 20 exports from Mexico to the US in 2015 by dollar value.
The number one export category, by far, is vehicles and vehicle parts, totaling almost $80 billion — or about 25% of the country's total exports to the US — according to data from Intracen. The next three on the list are electrical components, food, and computers.
"The upshot, then, is that targeted measures imposed on the vehicle, electronics, and food and beverage sectors would hit Mexico's economy especially hard," wrote Shearing. "Similarly, in the event of a blanket tariff across all sectors, producers in these areas would be among the hardest hit."
The Mexican peso is getting smashed following reports the White House is getting ready to pull out of NAFTA. The peso is down by 2.2% at 19.2704 per dollar as of 12:53 p.m. ET.
(Capital Economics)
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