No NAFTA Means Retailers Would Have to Increase Prices and Decrease Jobs

The North American Free Trade Agreement is still being negotiated between the United States, Mexico and Canada, but no new trade accord has been hammered out and retailers are getting worried.

Recently, the National Retail Federation commissioned a study on how the pact’s demise would affect retailers and shoppers, and the news isn’t good.

According to the study done by AT Kearney, the lack of a free-trade agreement would cost shoppers $16 billion and result in 128,000 retail jobs being lost.

“It’s clear NAFTA must be modernized, but we can’t lose sight of the fact that this agreement helps ensure that American families have access to products they need at prices they can afford,” said Matthew Shay, the NRF’s chief executive and president, a trade group based in Washington, D.C. “As this report shows, withdrawing from NAFTA would jeopardize countless U.S. jobs and force consumers to pay more for everyday products like groceries and blue jeans.”

Many Los Angeles brands manufacture their blue jeans in Mexico and rely on duty-free imports to keep costs down.

Last year, retailers imported $128 billion worth of merchandise from Mexico and $54 billion from Canada, according to the study. When it comes to textiles and apparel, imports in 2017 totaled $4.8 billion from Mexico and $1.3 billion from Canada.

If the United States withdrew from NAFTA, the study said, retail imports would be subject to $5.3 billion in annual tariffs that would most likely be passed on to consumers in the form of higher prices.

Even with the tariffs passed on, retailers would see a $10.5 billion hit to their bottom line, resulting in 68,000 jobs not being filled over the next three years and another 60,000 jobs, which are supported by the retail industry, being lost.

Food and beverages sold at grocery stores would take the biggest hit at $2.7 billion, followed by apparel and footwear at $501 million and household goods at $498 million.

The remainder of the impact would come from flow-through costs of tariffs imposed on other industries, which would drive up retailers’ costs for services, including transportation.