Mexico’s top trade negotiator, [Mexican Economy Minister Ildefonso Guajardo], doubled down on threats to break off talks to rework NAFTA, saying his country will walk away if the U.S. insists on slapping duties or quotas on any products from south of the border.

This doesn’t mean, Guajardo emphasized, that Mexico would be looking to scrap NAFTA. But by saying it refuses to even discuss the kind of tariffs President Donald Trump has long trumpeted, the country is ratcheting up the pressure on U.S. negotiators and effectively daring them to pull out of the 23-year-old pact...

Mexican officials have said they expect official talks to start in June. And if they fail? “It wouldn’t be an absolute crisis,” said Guajardo, who headed the NAFTA office of the Mexican embassy in the U.S. in the early 90s, when the pact was being written and implemented.

Without NAFTA, trade between Mexico and the U.S. would be ruled by World Trade Organization strictures limiting tariffs either country can impose on the other, with the average for Mexico at around 3 per cent, according to the Mexico City-based political-risk advisory firm Empra. That “would take away some of our margin of competitiveness,” the minister said, but would be manageable.

One thing that could help mitigate the impact is the tumble in the peso. It’s plunged 25 per cent against the dollar in the past two years, swelling profit margins for exporters...

This was excerpted from 27 February 2017 edition of the Financial Post.