How NAFTA's replacement could affect the Texas economy

President Donald Trump announced he's terminating the North American Free Trade Agreement.

Instead, the president has reached a new agreement with Mexico with the potential to loop in Canada later on. The new deal could have a great impact on the Texas economy.

NAFTA going away is a big deal, but at least some say it’s not really going away.

Interstate 35 is far from a road filled only with North Texas commuters. It plays a major role in the U.S./ Canada/ Mexico trade agreement, earning the nickname "the NAFTA Superhighway.”

SMU Economist Mike Davis says Texas has benefitted greatly from the 24-year-long agreement.

“If NAFTA were to somehow blow up, if this were not business as usual, then we would really feel the impact here in Texas,” Davis said.

In the Oval Office on Monday, President Trump shook up the future of NAFTA when he announced he has reached a deal for a new U.S.-Mexico trade agreement.

“We'll get rid of the name NAFTA,” he said. “It has a bad connotation because the United States was hurt very badly by NAFTA.”

While the name might be different, Davis says not much else is.

“President Trump can say we shouldn't even call this NAFTA, but the president can also say we shouldn't call an animal with a long neck a giraffe.”

The main difference for now is that Canada's not yet in on it.

Texas Senator John Cornyn said that needs to change. He released a statement saying: “This is a positive step, and now we need to ensure the final agreement brings Canada in to the fold and has bipartisan support. Millions of jobs in Texas depend on an updated NAFTA, and it's important that we get this right."

Canada is currently locked in a tariff battle with Trump. The president is hinting at possible retaliation against Canada's auto industry if a deal can't be reached, although he says they'll start negotiating with Canada soon.

“NAFTA without Canada is a stool with two legs,” Davis said. “The supply chain has to extend from all the way in the north to all the way in the south.”

This deal from Mexico is far from over. In addition to negotiations with Canada, it would have to be ratified by lawmakers in each country. The U.S. wouldn't vote on it until next year. 

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