Trump tariffs threaten to torpedo NAFTA

Trump tariffs threaten to torpedo NAFTA
© Getty

President TrumpDonald John TrumpSenate GOP budget ignores Trump, cuts defense Trump says he'll nominate Stephen Moore to Fed White House: ISIS territory in Syria has been 100 percent eliminated 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. 

ADVERTISEMENT

"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 McConnellTrump: Green New Deal 'the most preposterous thing' and 'easy to beat' 2020 Dems avoid this year's AIPAC conference GOP eager to exploit Dem court-packing fight 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 RossThe Hill's 12:30 Report: O'Rourke jumps into 2020 fray 'Marie Antoinette' activist attends House hearing to protest Trump Commerce chief The Hill's Morning Report - Trump, Senate GOP clash over Yemen, border security 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 RyanFormer Dem candidate says he faced cultural barriers on the campaign trail because he is working-class Former House candidate and ex-ironworker says there is 'buyer's remorse' for Trump in Midwest Head of top hedge fund association to step down 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 LighthizerThe Trump economy keeps roaring ahead Trump says no discussion of extending deadline in Chinese trade talks McConnell urges GOP senators to call Trump about tariffs 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 LeeStop asking parents to sacrifice Social Security benefits for paid family leave The Hill's 12:30 Report: Trump hits media over New Zealand coverage GOP moves to rein in president's emergency powers MORE (Utah), and supported by Sens. Jeff FlakeJeffrey (Jeff) Lane FlakeTrump's attacks on McCain exacerbate tensions with Senate GOP Schumer to introduce bill naming Senate office building after McCain amid Trump uproar Trump keeps tight grip on GOP MORE (Ariz.), Cory GardnerCory Scott GardnerOvernight Health Care: CDC pushes for expanding HIV testing, treatment | Dem group launches ads attacking Trump on Medicare, Medicaid cuts | Hospitals, insurers spar over surprise bills | O'Rourke under pressure from left on Medicare for all Dem group launches ads attacking Trump's 'hypocrisy on Medicare and Medicaid cuts' Trump keeps tight grip on GOP MORE (Colo.) and Ben SasseBenjamin (Ben) Eric SasseTrump approves Nebraska disaster declaration Nebraska lawmakers urge Trump to approve disaster funding Republicans up for reelection fear daylight with Trump 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.”