Trump tariffs threaten to torpedo NAFTA

Trump tariffs threaten to torpedo NAFTA
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President TrumpDonald John TrumpA better VA, with mental health services, is essential for America's veterans Pelosi, Nadler tangle on impeachment, contempt vote Trump arrives in Japan to kick off 4-day state visit MORE’s decision to impose steep steel and aluminum tariffs on Canada and Mexico is threatening the ongoing negotiations over the North American Free Trade Agreement (NAFTA), a key trade deal for all three economies.

Canada and Mexico had been temporarily exempted from the tariffs while they negotiated updates to NAFTA with the Trump administration. 

But with an end-of-the-month deadline looming to make a decision, Trump opted to hit the nation’s two largest trading partners with duties of 25 percent on steel and 10 percent on aluminum. 

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"It's nerve-wracking. I would consider, at this point, that NAFTA is really at risk," said Sherman Robinson, a trade expert at the Peterson Institute for International Economics.

The U.S. is imposing the tariffs under the rarely used Section 232 of a trade law that allows the president to impose tariffs for national security reasons.

Republicans on Capitol Hill have expressed deep disdain for Trump’s actions, warning against a trade confrontation with major allies. 

“I don't think anything good will come out of a trade war,” Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellThe Hill's 12:30 Report: Trump orders more troops to Mideast amid Iran tensions What if 2020 election is disputed? Immigration bills move forward amid political upheaval MORE (R-Ky.) said Friday.

“And I hope we pull back from the brink here because these tariffs will not be good for the economy, and I worry that it will slow, if not impede significantly, the progress we were making economically in U.S.,” he said. 

Other critics of the Trump tariffs say that the president is using national security as a pretext for imposing tariffs.

“Claiming steel bought from our allies is a 'national security' threat weakens our credibility. These tariffs, i.e. taxes, hurt American workers, employers and consumers,” Sen. Pat ToomeyPatrick (Pat) Joseph ToomeyOvernight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns Top GOP candidate drops out of Ohio Senate race MORE (R-Pa.) tweeted on Friday.

Commerce Secretary Wilbur RossWilbur Louis RossChina state media accuses US of seeking to 'colonize global business' China accuses US of 'rumors' and 'lies' about Huawei government ties Weather forecasters predict up to 15 major storms this hurricane season MORE said Thursday on CNBC that the decision to impose the tariffs is a “reflection that the [NAFTA] discussions didn’t get far enough to justify another postponement or an exemption.”

But both Canada and Mexico have repeatedly said they won’t bend if Trump uses the economic penalties as leverage in the NAFTA talks.

"The Trump strategy is very dangerous. All these countries, I think, are likely to gang up on the United States, both in political and economic terms," said Charles Doran, director of Canadian studies at the Johns Hopkins School of Advanced International Studies.

"The old Canada-U.S. deal could suit Canada better than NAFTA," he said.

Rufus Yerxa, head of the National Foreign Trade Council, said that while he doesn’t envision Trump withdrawing from NAFTA, the prospects for a deal are severely hampered by the tariffs.

“We can’t expect business as usual with them when we’re basically throwing out the rule book on trade and taking all kinds of unprecedented actions,” Yerxa said.

“Things were tough on the outstanding issues with NAFTA, they’ll get even more tense now, and it will be harder for us to get a positive outcome,” he said. 

Mexico and Canada each announced their own retaliatory tariffs on a wide range of U.S. goods Thursday, further inflaming tensions.

Speaker Paul RyanPaul Davis RyanAmash storm hits Capitol Hill Debate with Donald Trump? Just say no Ex-Trump adviser says GOP needs a better health-care message for 2020 MORE (R-Wis.) had said that a deal on NAFTA needed to be reached by May 17 for Congress to be able to consider it under the time constraints set out in fast-track rules.

With that deadline now passed, the negotiations could drag on for months. 

Even if U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerChinese, US negotiators fine-tuning details of trade agreement: report The Trump economy keeps roaring ahead Trump says no discussion of extending deadline in Chinese trade talks MORE can reach an agreement this year, it would be up to the next Congress — one whose composition will be determined by the November midterm elections — to ratify it.

Simon Lester, a trade analyst at the Cato Institute, said the tariffs make the NAFTA talks more challenging, though not necessarily impossible.

“Having said that, the NAFTA talks seem to be going very badly,” Lester said.   

“The political calendar is becoming difficult, and it’s not clear that the governments are willing to make the necessary compromises,” he said.  

“So a completed NAFTA seems very unlikely anytime soon, but with the chaos and surprises we are seeing these days, I suppose anything is possible.”

Canadian Prime Minister Justin Trudeau on Thursday claimed that a NAFTA agreement was nearly at hand, but said the Trump administration derailed the talks by insisting on a five-year sunset clause.

“I had to highlight that there was no possibility of any Canadian prime minister signing a NAFTA deal that included a five-year sunset clause,” Trudeau said.

“And obviously the visit didn't happen.”

The administration pushed back on Trudeau’s account and said a deal was never close to completion.

Trump, Trudeau and other world leaders are slated to meet next week when Canada hosts a Group of Seven meeting in Quebec. So far, Trump has shown no signs of backing down.

“The United States has been taken advantage of for many decades on trade. Those days are over," Trump said in a statement on Thursday.

"Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State will agree to a fair deal, or there will be no deal at all." 

Trump followed up Friday morning by writing, “Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers!”

Later on Friday, Trump said he wouldn’t mind having separate trade deals with Mexico and Canada.

Trump’s hardening trade position is creating frustration on Capitol Hill, prompting some Republicans to talk of possible legislative action. 

Several GOP senators on Friday expressed support for limiting the president’s trade powers and requiring congressional approval to impose tariffs. 

On Friday, Toomey became the fifth GOP senator to sign onto such legislation, spearheaded by Sen. Mike LeeMichael (Mike) Shumway LeeOn The Money: Senate passes disaster aid bill after deal with Trump | Trump to offer B aid package for farmers | House votes to boost retirement savings | Study says new tariffs to double costs for consumers Senate passes disaster aid bill after deal with Trump Hillicon Valley: Google delays cutting off Huawei | GOP senators split over breaking up big tech | Report finds DNC lagging behind RNC on cybersecurity MORE (Utah), and supported by Sens. Jeff FlakeJeffrey (Jeff) Lane FlakeSen. Coons examines Amazon's privacy and data security practices for Alexa devices Oil companies join blitz for carbon tax The Hill's Morning Report - White House, Congress: Urgency of now around budget MORE (Ariz.), Cory GardnerCory Scott GardnerSenate Republicans running away from Alabama abortion law Frustrated GOP senators want answers from Trump on Iran Graham: Trump officials not adequately briefing on Iran threat MORE (Colo.) and Ben SasseBenjamin (Ben) Eric SasseSenate GOP votes to permanently ban earmarks The Hill's Morning Report - White House, Congress: Urgency of now around budget Senate Republicans running away from Alabama abortion law MORE (Neb.).

“Congress should assert its constitutional responsibility and lead on trade policy so Americans keep access to affordable goods and services, and the opportunity to sell our products abroad,” Toomey said. 

“If this devolves into a full-blown trade war, the resulting harm will undo all of the great economic progress we’ve made with deregulation and tax reform.”