Trump may quit Nafta trade deal
UNITED STATES: President Donald Trump is considering issuing an executive order to pull the US from the North American Free Trade Agreement (Nafta), senior administration officials said yesterday, although the timing of the action is uncertain.
The move, which one source said might come as soon as Trump’s 100th day in office on Saturday, could unravel one of the world’s biggest trading blocs. News of the potential presidential action drove the Mexican and Canadian currencies lower.
Trump had threatened to renegotiate the Nafta pact during last year’s election campaign, saying it had destroyed American jobs, although he has backed off from taking tough action on trade since taking office in January.
Mexico’s peso and Canada’s dollar fell against the US dollar. Stocks in both US neighbours also weakened.
A disruption in trade between the three Nafta partners could wreak havoc in the vehicle sector and other industries, hitting profits at companies that have benefited from zero-level tariffs and Mexico’s relatively low labour costs. It would also hit US agricultural exports hard.
‘‘To totally abandon that agreement means that those gains are lost,’’ said Paul Ferley, an economist at Royal Bank of Canada.
Chicago Board of Trade corn futures fell 5 cents a bushel, reflecting concerns that the pact was under real threat.
Trump has repeatedly vowed to pull out of the 23-year-old trade pact if he is unable to renegotiate it with better terms for America. He has long accused Mexico of destroying US jobs. The US went from running a small trade surplus with Mexico in the early 1990s to a US$63 billion deficit in 2016.
Trump has stopped short of a formal threat to kill Nafta so far, but legal experts say he probably has the authority as president to give 60 days’ notice that America is exiting the pact. It was under an executive order signed by Trump on January 23 that the US pulled out of the sweeping Trans-Pacific Partnership trade deal.
Trump has faced some setbacks since he took office in January, including a move by courts to block parts of his orders to limit immigration.
Withdrawing from Nafta would enable him to say he has delivered on one of his key campaign promises, but it could also hurt him in states that voted for him in the election. ‘‘Mr President, America’s corn farmers helped elect you,’’ the National Corn Growers Association said. ‘‘Withdrawing from Nafta would be disastrous for American agriculture.’’
An administration source said there were diverging opinions within the US government about how to proceed, and it was possible that Trump could sign the executive order before the 100-day mark of his presidency.
Mexico had expected to start Nafta renegotiations in August, but the possible executive order could add urgency to the timeline.
The Mexican government had no comment on the draft order. The country’s foreign minister said Mexico would walk away from the negotiating table rather than accept a bad deal.
Trump recently ramped up his criticism of Canada, and this week ordered 20 per cent tariffs on imports of Canadian softwood lumber, setting a tense tone as the three countries prepared to renegotiate the pact.
Canada said it was ready to come to talks on renewing Nafta at any time. – Reuters