MEXICO SET to impose duties on $3 billion in U.S. goods.
WASHINGTON — President Donald Trump wants to end the three-party talks to renegotiate the North American Free Trade Agreement, aiming instead to deal separately with Canada and Mexico to restructure the trade accord, a senior adviser said Tuesday.
Trump does not intend to withdraw from NAFTA, National Economic Council Director Larry Kudlow said on Fox & Friends. But after more than one year of multilateral discussions, he feels the current approach hasn’t been fruitful and a new one is needed, Kudlow said.
“His preference now — and he asked me to convey this — is to actually negotiate with Mexico and Canada separately,” Kudlow said. “He prefers bilateral negotiations.”
The announcement came as Mexico said it would impose import duties on $3 billion worth of U.S. products, including cheese, bourbon and pork, making good on its threats that it would retaliate for U.S. tariffs on steel and aluminum.
With its presidential election 26 days away, Mexico’s government imposed a 20 percent tariff on U.S. pork, apples and potatoes and 20-25 percent tariffs on cheese and bourbon. Mexico tailored the list of retaliatory duties to hit states governed by senior Republicans, such as the bourbon produced in Kentucky, the home state of Senate Majority Leader
Mitch McConnell.
It wasn’t immediately clear how separate talks would work. The United States, Mexico and Canada agreed to NAFTA in the 1990s, and all three countries have worked to renegotiate the deal since Trump became president. Changes would have to be agreed to by all sides.
But officials from the three countries have been unable to find a consensus on several critical issues, leading to angry finger-pointing between Trump and Canadian Prime Minister Justin Trudeau in recent days. Trump has accused Canada of cheating the United States through unfair trade practices, and Canadian officials have said Trump is using inaccurate information to attack a U.S. ally.
“This divide-and-conquer strategy is not entirely unexpected, especially now that the three-way negotiating process seems to have hit a wall,” said Mary Lovely, an economist at Syracuse University.
Trump has frequently expressed his preference
for reaching agreements with other countries one at a time, rather than multilateral agreements like NAFTA or a 12-country Asia-Pacific deal he abandoned upon taking office last year. Earlier this year, he nudged South Korea into making concessions and accepting changes to a 6-year-old trade pact between the two countries.
“When you have to compromise with a whole bunch of countries, you get the worst of the deals,” Kudlow said. “Why not get the best? … Canada is a whole lot different from Mexico.”
Most economists say broader trade deals typically work more effectively than one-on-one pacts between countries. A hodgepodge of two-country trade deals tends to distort corporate decision-making.
Trump is trying to use the threat of tariffs on steel and aluminum imports, as well as other goods, to force numerous countries to agree to trade concessions. He’s in standoffs with Mexico, Canada, China, Japan and members of the European Union, a collection of countries that includes many of the world’s largest economies and the largest U.S. trading partners. The talks all appear to be
moving slowly or stalling, leading to angst on Capitol Hill and among business leaders.
Kudlow said he briefed a senior Canadian official on Trump’s idea Monday and was still waiting for a response. Trump and Kudlow are traveling to Quebec later this week for a meeting of leaders from seven of the world’s leading economies, and several of those officials have expressed frustration at Trump for his protectionist approach to trade.
“NAFTA has kind of dragged on,” Kudlow said of the negotiations. “The president is not going to leave NAFTA. He is not going to withdraw from NAFTA. He’s just going to try a different approach.”
Yet it’s far from clear that separate discussions by the United States with Mexico and Canada could leave the three-nation NAFTA deal altered but intact.
A Canadian government official, speaking on condition of anonymity to discuss diplomatic relations, said there has long been oneon-one talks as part of the NAFTA negotiations, but noted that the trade pact is a three-country agreement and any resolution would require
all three countries to sign on together.
Meanwhile, China has offered to increase purchases of American goods by about $25 billion this year to fulfill Trump’s desire to shrink the U.S. trade deficit with the world’s second-largest economy, according to two people familiar with the matter.
In particular, China has shown a willingness to step up purchases of U.S. goods including crude oil, coal and farm products, according to the people briefed on the talks.
Chinese officials have indicated the nation is open to buying as much as $70 billion in U.S. exports, the people said. But much of that represents products the Asian nation has already promised to buy, and in some cases the Chinese haven’t been willing to back their pledges with written contracts, the sources said. The $70 billion offer was first reported by The Wall Street Journal.