TALKING TOUGH ON TRADE
Analysts mixed on Trump’s push to redo NAFTA
President Trump accused Canada and Mexico of being “very difficult” in renegotiating the North American Free Trade Agreement and threatened anew to terminate the deal yesterday — an ominous or hopeful prospect for companies and investors, depending on the sector.
Ahead of the second round of NAFTA renegotiations — set to begin Friday in Mexico City — Trump tweeted yesterday, “We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”
The U.S., Mexico and Canada began formal negotiations earlier this month to rework the 23-year-old trade pact that Trump blames for hundreds of thousands of lost U.S. factory jobs. Trump said at a rally last week in Phoenix that he would “end up probably terminating” NAFTA “at some point.”
Experts said Trump is trying to signal a willingness to walk away, one of his trademark negotiation tenets, and that the possibility would have varied consequences.
Joel Trachtman, professor of international law at Tufts University’s Fletcher School, said eliminating NAFTA would introduce tariffs on products like cheap Mexican steel and make American-made steel more competitive, but could also cut demand for U.S.-grown corn that’s seen exports to Mexico skyrocket under NAFTA.
“You’ve got to remember that if the steel companies are helped by higher prices for steel, the car companies get hurt by the higher price of steel and are made less competitive worldwide,” Trachtman said. “You have to look at it company by company.”
Timothy Wise of Tufts University’s Global Development and Environment Institute said Trump is conflicted because different bases of support, such as the Rust Belt and the agricultural heartland, would see disparate consequences if NAFTA disappeared.
“I don’t think the business community has any appetite at all to have the U.S. withdraw from NAFTA,” Wise said. “Many of the people in his base actually benefit from trade.”
Wise said Trump is “not entirely wrong” about NAFTA causing U.S. manufacturing job losses, but said “what he’s wrong about is he can fix that problem by withdrawing from NAFTA.”
Advocates of retaining NAFTA say a more targeted renegotiation of things like dispute resolution processes and digital commerce could address the trade agreement’s shortcomings without unintended consequences.
Mexico’s foreign relations ministry responded to Trump’s comments yesterday by reiterating that Mexico will never pay for a border wall and that it will not renegotiate NAFTA via social media or the press.
Mexico and Canada have taken steps in recent years to strike trade pacts with European and Asian nations, making them less dependent on U.S. imports and exports.