Trump’s tariffs lessen likelihood of NAFTA deal
Canada, Mexico unhappy, talks facing uphill battle
WASHINGTON — Any chance of a quick deal on a renegotiated NAFTA has been scuppered by U.S. President Donald Trump’s decision to end an exemption for Canada and Mexico from crippling tariffs on steel and aluminum exports, Canadian government insiders say.
Indeed, one well-placed, senior official said the chances of striking any deal on NAFTA, ever, have “just fallen through the floor.”
Trump, meanwhile, resurrected Friday an idea he’s floated before — negotiating separate bilateral trade pacts with Canada and Mexico if no deal can be reached on modernizing the trilateral North American Free Trade Agreement.
But coming one day after Trump antagonized both countries by using national security concerns to justify imposing tariffs of 25 per cent on steel and 10 per cent on aluminum on the U.S.’s NAFTA partners, Canadian officials said the renewed pitch for bilateral deals is a non-starter.
“The government commitment remains NAFTA,” said one of several officials, all of whom spoke on condition of anonymity because of the sensitivity of negotiations and efforts to manage deteriorating relations with the United States.
While Mexican negotiators are scheduled to return to Washington next week to resume talks on the pivotal NAFTA issue of autos, Canadian officials say the round-the-clock phase of negotiations of the past few weeks is over. Talks will continue in a slower, less urgent fashion, with the next potential window for more intensive negotiations likely not coming until after the July 1 Mexican presidential election.
Even then, one senior official predicted the chances of striking a deal are slim. That’s because the Trump administration has, in Canada’s view, made a “massive, massive strategic blunder” in thinking it will be able to drive a harder bargain with a new Mexican president.
It’s compounded that miscalculation by lifting the steel and aluminum tariff exemption on Mexico, the official said, predicting the move will compel presidential contenders to take an even harder line against U.S. trade practices during the campaign and, thus, limit the eventual winner’s room to manoeuvre on NAFTA.
That could mean no deal will ultimately prove possible, which could provoke Trump to follow through on his oft-repeated threat to tear up NAFTA. However, Canadian officials contend such a unilateral move is likely illegal under U.S. law and, in any event, they expect a backlash from Congress, American business leaders and — most importantly for Trump — Republican fundraisers, who would probably force the president to back down.
Still, Trump reiterated Friday his preference for two separate trade deals with Canada and Mexico, rather than the continental pact.
“To be honest, I wouldn’t mind seeing NAFTA where you’d go by a different name, where you’d make a separate deal with Canada and a separate deal with Mexico,” Trump said after a meeting with North Korean officials.
“You’re talking about a very different two countries. I wouldn’t mind seeing a separate deal with Canada where you have one type of product . . . and a separate deal with Mexico.”
NAFTA, Trump repeated, has been “a lousy deal for the United States from Day 1.
“We lose a lot of money with Canada and we lose a fortune with Mexico. But it’s not going to happen like that anymore,” he said.
However, Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto are showing no sign of breaking up the united front they’ve demonstrated so far.
“The leaders expressed their strong concerns and deep disappointment with the imposition of U.S. tariffs on Canadian and Mexican steel and aluminum exports,” Trudeau’s office said in a summary of a Thursday phone call with the Mexican leader.
“They also discussed the North American Free Trade negotiations and agreed to continue working toward a mutually beneficial outcome.”
In retaliation for the tariffs imposed on Canadian steel and aluminum, Trudeau announced Thursday that Canada will impose $16.6-billion worth of “countermeasures” that hit a range of U.S. products, from flat-rolled steel to playing cards.
Mexico also plans tariffs on a variety of U.S. products, including flat steel.
In the wake of the burgeoning trade war, some trade experts also question whether there might actually be a NAFTA negotiating table to return to given the reality of the political calendar.
Mexico’s presidential election is one month away and the U.S. congressional midterms follow in the fall.
Trump’s latest move amounts to “blackmail” in the NAFTA renegotiation, although it doesn’t kill chances of carving out a deal.