LANSING – If President Donald Trump pulls the United States out of the North American Free Trade Agreement, Michigan is one of the states most vulnerable to negative economic consequences, according to a new analysis from the Moody’s credit rating agency.
Michigan’s reliance on trade with Canada and Mexico is what puts it at risk, Moody’s said, listing the other states at greatest risk as Texas, Vermont and North Dakota.
No state, Moody’s said, relies more on imports and exports with Canada and Mexico more than Michigan, with 27 percent of its gross state product dependent on NAFTA trade (more than $200 billion). The analysis said, “Michigan’s exposure to potentially more sensitive industries makes it more vulnerable to a termination of NAFTA” than other states.
A NAFTA termination would hurt income and sales tax revenues in the state, Moody’s said. And Michigan has fewer reserve funds available than Texas and North Dakota to withstand revenue volatility.
“Michigan is most vulnerable to NAFTA withdrawal due to its concentrated trade economy, dependence on income and sales tax revenue and weak reserve position,” the analysis said.
Further, the analysis said, “Detroit is also acutely vulnerable to trade volatility with Canada and Mexico” because of the area’s reliance on automobile manufacturing.
The analysis warned that Comerica bank, with its concentration in Michigan and Texas (half its loan portfolio is in the two states, with 18 percent of its loan portfolio in the automotive sector) has some vulnerability in a NAFTA termination.
This story was published by Gongwer News Service.