This is the most important story of the week for Michiganders, one that has received surprisingly little attention from most media outlets.

The Michigan economy would get hit the hardest among the 50 states if the Trump administration scraps the North American Free Trade Agreement (NAFTA) at the negotiating table, according to a report by the Moody’s credit rating agency.

Michigan is the state that is most dependent on NAFTA-related trade, according to the Moody’s report, and Detroit in particular would be vulnerable to a big shake-up in trade relations with Canada and Mexico due to NAFTA’s ongoing role in creating an integrated tri-national auto industry.

That message has been explained by economists for several months yet it still fails to gain traction with the public.

Overall, Michigan, Texas, Vermont and North Dakota likely would face the greatest economic fallout if the U.S. were to abandon the trade agreement, according to the rating agency.

As negotiations plod onward, the report released Thursday found that termination of the trilateral trade pact could cause the loss of 180,000 trade-related jobs in Michigan and would damage the state’s automotive and banking sectors.

Michigan is more reliant on trade with Canada and Mexico than any other state as 27 percent of its economic output — its gross state product — is generated by those imports and exports. That is about five times the impact in the U.S. overall.

Meanwhile, news reports from earlier this week, buffeted by a President Trump post on Twitter, reveal that Trump has essentially turned the negotiations into amateur hour by making ridiculous claims. The president tried to bluff his way toward an attack on Canadian Prime Minister Justin Trudeau by falsely asserting that our neighbors to the north, and most countries across the globe, unfairly maintain trade advantages with the U.S. that push the United States into bilateral trade deficits.

In fact, the U.S. enjoys a $12.5 billion trade surplus with Canada and posts a surplus with most nations across the globe. As recently as Wednesday, Trump reiterated his desire to scrap NAFTA while acknowledging that he was playing games with Trudeau.

“I said, ‘Wrong, Justin, you do (create a U.S. deficit).’ I didn’t even know. … I had no idea,” the president said while addressing a Republican fundraiser gathering in Missouri.

During the 2016 presidential campaign in Michigan, Trump and Sen. Bernie Sanders offered scare tactics about NAFTA in order to win votes in the Great Lakes State.

What went largely ignored during that campaign was that 36 states, including Michigan, list Canada as their top trading partner, not Mexico or China or other Asian countries. Many of those exports to Canada consist of agricultural products that dramatically benefit farmers in Michigan and across much of Middle America.

At a time when Michigan suffers from inadequate funding of roads and bridges and education, Moody’s predicted that the state’s tax revenue stream is also at risk from a potential end to NAFTA, with likely budget deficits in the near future that could require slashing basic public services.

One company that could suffer in a big way is Comerica Bank, which operates primarily in Michigan and Texas.

The Moody’s report concluded: “Comerica’s loans to the automotive sector, an industry potentially affected by a NAFTA cancellation, account for 18 percent of its loan portfolio. The possibility of two of its major markets (Michigan and Texas) being affected at the same time is a credit threat.”

The next round of NAFTA negotiations is tentatively scheduled to begin April 8 in Washington. Negotiators completed a seventh round of talks earlier this month with little progress to report.

 

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