Trump’s Threat of NAFTA Withdrawal Loses its Edge08/24/2017
Canada and Mexico appear to have reached a conclusion that when President Donald Trump threatens to withdraw from NAFTA, it is a negotiating ploy that is all bark and no bite.
Trump flashed his signature bravado at a rally in Phoenix on Tuesday night when he said the United States will “probably end up terminating NAFTA at some point.” The warning shot marked the president’s first comments on the trilateral trade deal since the three countries formally began renegotiating it last week.
His latest threat to walk away from the free trade agreement was reminiscent of numerous statements he made during campaign speeches and a reminder that he nearly signed an executive order to withdraw from the deal just four months ago. This time, Trump’s hot talk in the desert elicited little reaction from Canada or Mexico, sending a sign that both countries are growing inured to the president’s nearly constant barrage of threats on trade.
Instead, concerns were raised from within the United States government, where officials and lawmakers who support the deal see little value in the president repeatedly going to the well of harsh rhetoric in a way that makes the United States’ negotiating position more difficult.
“I don’t know a single person with a working brain cell that thinks that’s a good idea,” said one U.S. government source close to the talks, referring to renewing the threat of terminating the deal. “It’s a stupid message to send during the negotiations.”
Both Ottawa and Mexico City downplayed Trump’s latest comments as fairly standard procedure during sensitive trade negotiations. Mexican Foreign Minister Luis Videgaray posted on Twitter shortly after Trump’s vow to ditch the bargaining table that there were “no surprises” in his remarks.
“We are already in a negotiation,” Videgaray wrote in Spanish. “Mexico will remain at the table with serenity, firmness and national interest ahead.”
A few hours later, seeking to assuage domestic concern that Trump might make good on his promise, which had weighed on the peso’s value, Videgaray brushed off the comments as a negotiating tactic and said Mexico was not scared. “He’s negotiating in his own particular style,” Videgaray said on local TV on Wednesday morning, according to Reuters.
Canada took a similar tack, with an official noting the importance of the trade deal to jobs and the economy on both sides of America’s northern border but saying that “trade negotiations often have moments of heated rhetoric.”
“Our priorities remain the same, and we will continue to work hard to modernize NAFTA, supporting millions of middle-class jobs,” Canadian Foreign Ministry spokesman Adam Austen said in a statement.
Part of the reason Mexico and Canada might be less intimidated by Trump’s bluster is that they have plenty of other trading partners to fall back on if the relationship with the U.S. sours. Both countries have separate deals in place with the European Union — Mexico is currently ramping up talks to update theirs — and both are part of the effort to reboot the Trans-Pacific Partnership, which the remaining 11 members are pushing toward completion even without the U.S.
But after Trump cast aside the TPP almost immediately upon taking office, the U.S. has fewer such options to fall back on — so pro-NAFTA lawmakers and those from export-dependent states have repeatedly urged him to focus on modernizing and updating NAFTA, rather than terminating it.
House Ways and Means Chairman Kevin Brady — whose home state of Texas counts Mexico as the No. 1 market for its exports, followed by Canada — cautioned Trump on Wednesday to be more aware of the effects his words have on the country’s trade relationships.
“The president’s rhetoric is red-hot, and it creates real impact,” Brady said during a town hall discussion at AT&T headquarters in Dallas. “I think the rhetoric, the words from the president matter, so I’d like to see that take a different approach in tone.”
Brady, whose powerful committee oversees trade on Capitol Hill, is one of a core group of Republicans whose support will be crucial if the administration succeeds in renegotiating a new deal with Canada and Mexico, since it will likely have to go through Congress for approval.
If Trump decides to move forward with a complete withdrawal, most legal analysts say he has the executive authority to do so on his own, as long as he gives Canada and Mexico at least six months’ written notice.
The political question is whether Trump would discard NAFTA in the face of what certainly would be fierce resistance from Congress and industries like agriculture, which would take a significant hit in that event amid a sustained downturn in the farm economy.
Back in April, intense lobbying from the Hill and on the farm helped talk Trump down from inking a prepared executive order to withdraw from the deal. News of the planned order sparked such a public outcry and flurry of reaction in support of the deal that business and trade insiders sometimes refer to it as “Black Wednesday.”
But some four months after Trump backtracked from signing the withdrawal order, his comments in Arizona produced muted reactions even from the export-driven agriculture industry — suggesting that now that Canadian, Mexican and U.S. officials have begun a negotiation that resulted from Trump’s hard-line tactics, he needs to change his approach to meet the moment.
“Is anything he says surprising to anyone at this point?” the U.S. government source said. “It’s surprising only in that he’s mostly stayed on script on NAFTA, so we … haven’t heard it for awhile.”