The Mexican peso is getting smashed after reports the White House is getting ready to pull out of NAFTA.
The currency is down by 2.0% at 19.2445 per dollar as of 12:36 p.m. ET.
Earlier on Wednesday, Politico reported that the Trump administration is considering an executive order on withdrawing the US from NAFTA, citing two White House officials.
A draft order, written by Peter Navarro, the head of Trump’s National Trade Council, in close cooperation with White House chief strategist Steve Bannon, has been submitted for the final stages of review and could be released late this week or early next week, according to Politico.
Here’s the peso:
The North American Free Trade Agreement is a trade deal between the US, Mexico, and Canada. It was negotiated under President George H. W. Bush and implemented under President Bill Clinton in 1994 after heated debate in Congress.
NAFTA eliminated most tariffs, such as taxes on imports and exports, and on traded goods among the three nations. It put in place processes to get rid of other trade barriers too.
The point of NAFTA was to encourage economic integration among the US, Mexico, and Canada. And that, by extension, was supposed to boost economic prosperity for all three.
Trade between countries can theoretically improve economic efficiency and make everyone wealthier by allowing countries to specialize in what they’re good at. More concretely, one effect of increased economic integration would be for US firms to move production over to Mexico where labour is cheaper than in the US or Canada — for example, with the auto industry.
President Trump made the debate over free trade one of the central topics of his campaign. He argued in favour of ripping up trade deals, said NAFTA was “the worst trade deal in the history of the country,” and called the Trans-Pacific Partnership, or TPP, “a rape of our country.”
During his first week in office, Trump signed an executive regarding his intent to pull the US out of the TTP. Additionally, he has on multiple occasions stated his intent to “renegotiate” NAFTA.