NAFTA has recently been put up for renegotiation in an effort to modernize the agreement and ensure that the US, Canada and Mexico will continue to mutually benefit. Considering that retail directly and systemically affects roughly 16% of the US GDP, the effects on retail from a new agreement could have a major impact on the economy.
In an effort to help inform retailers and consumers, AT Kearney recently released a report highlighting the impact of NAFTA and the current tariff-free environment on the retail industry. Because of NAFTA, $182 billion worth of goods freely cross North American borders. If tariffs are reinstated the combined costs to consumers and impact of reduced spending for retailers is estimated at $15.8 billion each year. This translates into $290 in lowered retail spending per household triggering $39 billion in lost sales and putting 128,000 jobs at risk.
It seems like retail cannot catch a break, particularly when considering the impending potential increases in non-revenue generating expenses in interest and now potential tariff adjustments from NAFTA. There will ultimately be winners and losers from the continued retail shakeup; however, combined outside influences could potentially thin the herd more than expected.