Local economies in the U.S. and Canada with high border trade would become vulnerable as a result of the termination of the North America Free Trade Agreement (NAFTA) and Mexico would carry even higher risks, Moody's said Thursday.
The states of Michigan, Texas, Vermont and North Dakota in the U.S. are most vulnerable to a NAFTA termination, along with New Brunswick and Ontario in Canada, the credit rating agency said in a statement.
'Manufacturers in various sectors with integrated supply chains across all three countries would face higher costs and difficult investment decisions,' the statement said.
Among the three member countries, Mexico carries the highest risk since '... its reliance on U.S. trade makes it vulnerable to recession if NAFTA is terminated,' Moody's warned.
Meanwhile, the American economy would buffer the impact of a NAFTA break-up, however 'if this break-up were part of a broader protectionist policy stance, it could weigh on the competitiveness of its economy and relationship with other trading partners,' Moody's warned.
Canada, on the other hand, would not change its broader trade policy if NAFTA were terminated, because it is well positioned as an exporter to compete in other markets. It has many other free trade agreements, and it is a signatory of the Trans-Pacific Partnership.
By Ovunc Kutlu in New York
Anadolu Agency
energy@aa.com.tr