A Nafta Recession?
President Trump keeps touting the 3% U.S. GDP growth of the last two quarters and “record” stock prices, and the economy is his best talking point. But he might want to take a look at the latest Journal survey of economists about the impact of a U.S. withdrawal from the North American Free Trade Agreement.
Not a single economist said that the withdrawal Mr. Trump has threatened would help the economy. Some 82% said the economy would grow more slowly for the next two years than it would otherwise, and 7% predicted a recession. That underestimates the risks of recession in our view, given the political shock from such a reckless act by a U.S. President and the damage that would ensue to North American and even global supply chains.
Only one in four of the economists anticipates a U.S. withdrawal, but that also may be optimistic. Mr. Trump almost pulled out once, and he seems to believe that Mexico and Canada have no choice but to bend to U.S. wishes. But those two countries are already moving to diversify their trading options, and they have their own domestic political pressures not to cave to the U.S.
Mr. Trump is doing well overall on economic policy, with deregulation and support for tax reform. But his Achilles’ heel is his protectionist trade agenda and his lack of knowledge about the international economy.