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A.T. Kearney: NAFTA’s End Would Cost Retail

The near-term cost to retailers of exiting the North American Free Trade Agreement could be $15.8 billion, according to a study released by consulting firm A.T. Kearney.

The study, “How NAFTA Affects U.S. Retail,” quantifies the impact of a potential withdrawal from the treaty, and outlines what changes retailers might expect if the U.S. exits the pact.

The study reviews direct and indirect margin effects across all sectors of retail, including household goods, food and beverage, electrical and appliances, pharmaceuticals, auto parts, and apparel and footwear. The study also looked at the impact on retail employment, projecting losses of over 100,000 jobs within three years.

“The three macro areas we researched were tariff increases, reduced consumer spending, and lost jobs, each and collectively amounting to losses of billions of dollars and displaced lives,” said Johan Gott, A.T. Kearney principal and co-author of the study. “Retailers in different sectors would be affected in different ways, even from product to product. But bottom line, the impact will extend to millions of products imported into the U.S. NAFTA has dramatically influenced the U.S. economy, the retail sector, and Americans’ standard of living. From the time it came into force, retailers have gradually become de facto importers, because their customers demand the products that NAFTA allows them to purchase easily, affordably and with great variety. Retailers, then, are agents without the protections that other importers enjoy.”

Should NAFTA be terminated, A.T. Kearney indicated, retailers should take steps to quantify the effects on cost of goods sold; outline responses outlining several different scenarios that factor in potential impact; contact policymakers, industry groups and peers to share the real, direct effects the end of NAFTA would have; and prepare to share confidential data with government officials to demonstrate the effect.