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Original document was submitted as an honors thesis requirement. Copyright is held by the author.

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Thesis

Abstract

A United States withdrawal from the North American Free Trade Agreement – a tenant of Donald Trump’s 2016 presidential campaign – could significantly reduce job creation and consumer spending in a number of sectors within the U.S. economy. While it remains to be seen whether this proposed exit will occur, economists predict the main industries that will be affected are the automotive, farming, and petrochemical industries. The United States’ current political climate could potentially, negatively impact the farming industry – thus causing the unemployment rate to possibly skyrocket as well as adversely affecting consumer spending. This paper examines the potential adverse effects of a U.S. exit from NAFTA. Specifically, it examines the impact such an exit may have on farmers, and consumer spending within the sector. More precisely, I will be discussing cases in which countries have exited trade agreements and the consequences of the exit, such as Brexit. Drawing on a systematic literature review, this study collects and interprets research focusing on trade agreement withdrawal. This data is supplemented by financial reports provided by major agricultural corporations, and consumer spending statistics (e.g., avocado and cereal purchases). This study finds the significant correlation between consumer spending and the potential U.S. withdrawal from NAFTA, which may affect consumer spending. Also, major companies such as Kellogg’s may be forced to now pay a tariff on wheat, which will lower their revenue stream and in turn cause a mass number of layoffs. This study concludes with the recommendations for economists, who may wish to take greater care in evaluating the potentially adverse effects of this withdrawal on corporate production and consumer behavior.

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