Withdrawing from the North American Free Trade Agreement (NAFTA) could cost retailers and consumers up to $16bn a year, and lead to a loss of 128,000 retail-related jobs over the next three years, according to an AT Kearney study.
The AT Kearney study was commissioned by retail trade groups, including Food Marketing Institute (FMI), the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA).
It comes as officials from the US, Canada and Mexico meet in Washington this week to resume discussions on a new trade treaty.
The NAFTA talks will prioritise the trade in auto parts as the US is demanding that 40% of every car be produced in a high-wage country, otherwise, the car would be subject to a tariff. Mexico has previously rejected the US proposal as damaging to its own industry.
NRF President and CEO Matthew Shay said: “There’s a lot at stake for American retailers, workers and consumers as the administration resumes NAFTA negotiations.
“It’s clear NAFTA must be modernised, 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. As this report shows, withdrawing from NAFTA would jeopardize countless US jobs and force consumers to pay more everyday products like groceries and blue jeans.”
The report shows how currently US ‘grocery shoppers can wander the produce section in January and take home groceries to allow them to eat like it’s a June day’.
Last year, retailers imported $128bn worth of merchandise from Mexico, and $54bn from Canada, according to the study.
RILA president Sandra Kennedy called on the administration to ‘modernise and preserve NAFTA to support the millions of American jobs along the supply chain that rely upon free and fair trade’.
If the US exits NAFTA, retailers would absorb billions in new direct or indirect costs according to the study. The US imports about $43bn in food products from Canada and Mexico annually.
New tariffs, would cost retailers about $5.3bn, with nearly half of that cost coming from food and beverages according to the study.
Products, such as asparagus, which is grown primarily in Mexico, would see new tariffs of between 5% and 21.3%. According to the Kearney study, the retailers would experience scarcity of supply and a 13% increase on a basket of produce in the winter months.
AT Kearney principal and co-author of the study Johan Gott said: “If the United States terminates NAFTA, many importers would likely be covered by other protective sanctions against foreign competition.
“US retailers do not face the same kind of foreign competition, but they would be left to face higher costs for the goods they sell, a prospect whose ramifications would reverberate throughout the U.S. economy.”