U.S. Consumers Gain Financially from International Trade

September 11th, 2017

Debate on free trade agreements, and specifically the North American Free Trade Agreement (NAFTA), typically revolves around their impact on the U.S. economy and its major businesses. But what is NAFTA’s day-to-day impact on the average U.S. consumer?

Free trade agreements like NAFTA reduce tariffs and other international trade barriers, allowing diverse products to enter U.S. consumer markets. The growth of product variety not only increases consumer choice, but also puts downward pressure on goods prices through increased market competition.

More competitive goods markets strengthen purchasing power for U.S. consumers. A 2015 study on The Economic Benefits of U.S. Trade from the White House’s Council of Economic Advisors determined trade to be especially important for middle-class households, boosting their purchasing power by 29 percent from trade alone. A Peterson Institute for International Economics study further quantified this benefit, finding an increase in annual income of about $10,000 per household.

Consumer Purchasing Power Gain by Income Level

U.S. withdrawal from NAFTA, or enaction of protectionist measures, will drive up the cost of goods for all Americans, and the impact will be especially hard on middle and lower income families. In the wake of hurricanes Harvey and Irma, Americans can’t afford higher prices on their daily goods.