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For Michigan and Ontario, renegotiating NAFTA could be a risky proposition

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Bernard Wolf, a Professor Emeritus of Economics and International Business at York University, said President Donald Trump's notion of an equal trade balance makes no sense.

President Donald Trump talks a lot about "renegotiating" NAFTA.

There are few places that would feel the fallout from changes to the North American Free Trade Agreement (NAFTA) more than Michigan and Ontario.
Bernard Wolf, a professor emeritus of economics and international business at York University in Toronto, joined Stateside to talk about what NAFTA has meant to the economies of Michigan and Ontario.

The United States and Canada had already established a free trade relationship in 1965 to ship vehicles and parts across the border, but when NAFTA was created in the 1990s, it only improved that economic partnership. 

"[NAFTA] strengthened the relationship between Canada and the U.S. and it added Mexico in," Wolf said. "So now you have a really very intricate supply chain with basically small or very small vehicles produced in Mexico, labor-intensive parts produced in Mexico, then the greater value-added products produced in Michigan and Ontario."

While Wolf calls NAFTA a "win-win" for the U.S. and Canada, President Trump has publicly trashed the agreement and said he wants to see it renegotiated. So what would that mean for the national economy?  

"I get scared with respect to the world economy, not just Canada," Wolf said. "If we go back to the 1930s, what happened when the U.S. became isolationist and put up walls, you ended up with the Great Depression. I'm not saying that's the only reason for the Depression, however, the fact that [the U.S.] did not allow goods to be produced more efficiently then they were when you had open lines of trade, ended up with a situation where the U.S.,with its Smoot-Hawley Tariff, really increased barriers to a very considerable extent and other countries retaliated and trade shrunk. And with it productivity fell, output fell, and you ended up with the Great Depression. I'm not suggesting that's going to happen now, but protection is dangerous." 

Listen to the full interview above to hear why Wolf says Donald Trump's notion of an equal trade balance makes no sense and what a thicker border would mean for Ontario and Michigan. 

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