U.S. mending ties as Chinese trade fight looms
NAFTA talks revived; truce reached with EU
WASHINGTON — Gathering strength for a brutal trade war with China, the United States appears to be trying to patch things up with its friends.
U.S. and Mexican negotiators are meeting in Washington on Thursday and Friday to work on a rewrite of the North American Free Trade Agreement — an effort that looked virtually dead a few months ago. And last week President Donald Trump announced a cease-fire in a potentially destructive dispute with the European Union over trade in cars, trucks and auto parts.
Meanwhile, the Trump administration ratcheted up the pressure on China this week by proposing a doubling in tariffs on $200 billion of Chinese imports. Beijing has vowed to counterpunch with trade sanctions of its own.
“If you’re going to take China on, you’d better make sure you’ve shored up your base with your allies and made sure you kept other markets open,” said Michael Camunez, president of Monarch Global Strategies consultancy and a former U.S. Commerce Department official.
Trump campaigned on a vow to overhaul the 24-year-old NAFTA, a pact he called a job-killing disaster.
NAFTA did away with most barriers, including tariffs, on trade between the U.S., Canada and Mexico. Trump and other critics say the agreement encouraged U.S. manufacturers to move factories south of the border. He vowed to pull out of NAFTA if he couldn’t make a deal he liked.
Talks on a new NAFTA began almost a year ago but got bogged down over the Trump team’s insistence on measures that would discourage investment in Mexico and shift auto production to the United States.
Momentum suddenly resumed after Andres Manuel Lopez Obrador won the Mexican presidential election last month and expressed support for overhauling NAFTA.
Canada’s absence from this week’s talks raised suspicions that the United States was pursuing a divide-and-conquer strategy with its two trading partners, isolating Canada to pressure it into agreeing with whatever the U.S. and Mexico produced.
But David Macnaughton, Canada’s ambassador in Washington, told The Associated Press it made sense for the U.S. and Mexico to negotiate first. “There are a couple of lingering issues between the U.S. and Mexico” that need to be settled “before we can move on,” he said.
The most obvious is Trump’s push to require that autos contain more content made within the NAFTA trade bloc and specifically from countries that pay high wages (that is, not Mexico) to qualify for duty-free status. But the two countries are whittling away at their differences.
In June, Trump slapped taxes on imported steel and aluminum, hoping in part to pressure Canada and Mexico to agree to a NAFTA rewrite that was to his liking. But the two neighbors — and other U.S. allies and trading partners — have slapped back with tariffs of their own, often aimed at U.S. farmers who supported Trump in the 2016 election. The Mexicans, for example, targeted U.S. pork and cheese.