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U.S. Exporters Could Face High Tariffs without NAFTA

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Abstract

An underappreciated benefit of the North American Free Trade Agreement (NAFTA) is the protection it offers U.S. exporters from extreme tariff uncertainty in Mexico. U.S. exporters have not only gained greater tariff preferences under NAFTA than Mexican exporters gained in the United States, they have also been exempt from potential tariff hikes facing other exporters. Mexico’s bound tariff rates—the maximum tariff rate a World Trade Organization (WTO) member can impose—are very high and far exceed U.S. bound rates. Without NAFTA, there is a risk that tariffs on U.S. exports to Mexico could reach their bound rates, which average 35 percent. In contrast, U.S. bound rates average only 4 percent. At the very least, U.S. exporters would be subject to a higher level of policy uncertainty without the trade agreement.

Suggested Citation

  • Mary Amiti & Caroline L. Freund, 2017. "U.S. Exporters Could Face High Tariffs without NAFTA," Liberty Street Economics 20170417, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87189
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    More about this item

    Keywords

    tariffs; Mexico; exports; imports; NAFTA;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General

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