Trump mulls pulling US out of Nafta
WASHINGTON: 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, 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 tomorrow, 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 the election campaign as he said it had destroyed American jobs, although he has backed off tough action in trade since taking office in January.
“There is some discussion,” said one source. “There are some who are pushing for things sooner rather than later but that’s the same on every issue.”
Mexico’s peso and Canada’s dollar fell against the US dollar, with the peso shedding about 1.5% in just over an hour, while Canada’s “loonie” lost about .45%. Stocks in both US neighbours also weakened, with Mexico’s benchmark IPC index falling more than 1%in 15 minutes.
A disruption in trade between the three Nafta partners could wreak havoc in the car industry and other industries, hitting profits at companies that have benefited from zerolevel 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 the US. 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 $63 billion deficit in 2016.
Trump has stopped short of a formal threat to kill Nafta so far, but legal experts say he has the authority as president to give a 60-day notice that the US is leaving the pact.
It was under an executive order signed by Trump on January 23 that the US pulled out of the Trans-Pacific Partnership trade deal. Details about the draft order on Nafta were not immediately available.
Trump has faced setbacks since he took office, including a move by courts to block his orders to limit immigration.
Withdrawing from Nafta would enable him to say he delivered on one of his campaign promises, but it could also hurt him in states that voted for him.
“Mr President, America’s corn farmers helped elect you,” the National Corn Growers Association said. “Withdrawing from Nafta would be disastrous for us.” – Reuters