How would Minnesota be affected if NAFTA is renegotiated or scrapped?

With the future of NAFTA up in the air, we look at where Minnesota stands with exports and imports.
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The subject of NAFTA is in the news again with President Donald Trump hinting he may withdraw the U.S. from the trade agreement, before confirming it will stay in for now but will renegotiate terms with Canada and Mexico.

The North American Free Trade Agreement passed in the 1990s eliminates most tariffs on goods traded between the three nations and removes other regulatory barriers, but it has been criticized by Trump who feels like the U.S. gets a raw deal as it imports more than it exports.

As a state that enjoys trade particularly with Canada but also Mexico, the implications of a renegotiated NAFTA or withdrawal from it could have huge implications for Minnesota. GoMN has taken a look at how much trade the state does with the two nations.

What do we import?

The biggest implications for ordinary Minnesotans would be that the renegotiations leads to extra tariffs being imposed on goods imported into the U.S. from either of the two countries.

These include the everyday consumer goods that we pay for, so additional taxes on these goods would likely see prices increase at the register.

What do we get from Canada?

Minnesota imports around $7.5 billion-worth of goods and services from Canada every year, according to the Canadian Government. Of that $2.9 million is crude petroleum to be used mainly to fill our gas stations.

As it doesn't have any oil reserves itself, Minnesota imports around 70 percent of our crude oil from Canada along the Enbridge-Mainline Pipeline, this Minnesota House research paper says, with this topped up by deliveries from the Bakken oil fields of North Dakota.

Any extra tariffs on this oil would eventually be passed on to consumers at the pumps, so filling your car would be more expensive.

The second and third biggest imports from Canada are natural gas and electricity, with Minnesota importing $461 million and $346 million worth respectively.

Again, an increase in cost of these products will likely be passed on in gas and electricity bills, particularly with natural gas becoming a more significant part of our energy generation as companies like Xcel move away from coal-fired plants.

What do we get from Mexico?

Mexico is Minnesota's 3rd biggest trading partner (after China and Canada), and imports roughly $2 billion of goods every year.

Extra costs on goods we get from Mexico won't necessarily have a direct impact on our wallets the same way it would with Canadian imports, but it could have significant implications for Minnesota businesses that make and sell products in the U.S., or export them to other countries.

The Star Tribune reported that one of the most valuable products the state currently imports from Mexico is electrical machinery, such as motors and generators, so a change to NAFTA terms could see additional costs to the electronics and manufacturing industry in the state.

The same goes for the medical device industry, which is Minnesota's biggest export industry. MPR reports that many of Minnesota's medical device companies have facilities in Mexico and shift products back and forth between the countries during the manufacturing process.

What do we export?

Canada and Mexico are Minnesota's two biggest export markets, and the fear among businesses is that any tariffs the U.S. imposes on imports from Mexico and Canada under a renegotiated/scrapped NAFTA would be met with similar tariffs imposed by the two countries.

This could increase the costs for Minnesota businesses that export to Canada and Mexico, or potentially see them lose business if these countries choose to find solutions cheaper than importing from the U.S.

Medical products and civilian aircraft, engines and parts are Minnesota's two biggest export products, according to the U.S. Census Bureau.

What do we sell to Canada?

Minnesota exports around $4 billion-worth of physical goods and $864 million of services to Canada, with automobiles the biggest export in 2016.

This would include utility vehicles and ATVs made by Minnesota-based companies like Polaris and Arctic Cat, with Canada importing $293 million-worth of vehicles from Minnesota last year.

After this, optical, medical and precision instruments from companies like Medtronic are the second biggest export, worth $230 million last year, with drinks and alcohol third at $222 million.

What do we sell to Mexico?

Minnesota exported more to Mexico – $2.4 billion in 2016 – than it imported, and the state's agricultural industry is a major reason for this.

Around $800 million in agricultural commodities like corn and soybeans were sold by Minnesota farmers to Mexico last year, and according to MPR it would be the farming industry that would feel the impact of extra trade tariffs from Mexico first.

Food exports to Mexico from Minnesota-based companies like Cargill and Land O'Lakes could also be affected, with these two companies joining around 100 others in signing a letter to President Trump in January to remind him that agriculture and proceed food exports from the U.S. have quadrupled since NAFTA passed 23 years ago.

Other exports to Mexico include machinery, vehicles, plastics and iron and steel products.

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