President Trump lashed out at Canada and said he was considering enacting a tariff on auto imports if Ottawa didn’t agree to join a trade agreement with Mexico that could supplant the North American Free Trade Agreement (NAFTA), adding that he rejected a one-on-one meeting with Canadian Prime Minister Justin Trudeau over the trade impasse.
During a rare press conference on Wednesday that lasted nearly 82 minutes, Trump made clear that Canada’s strict import quotas on dairy products — and the tariffs of up to 300% for imports that exceed those quotas — were a major sticking point to ongoing trade negotiations. But he was elusive when asked if he would go to Congress to formally request that the United States withdraw from NAFTA.
Trump said he rejected a meeting with Trudeau “because his tariffs are too high, and he doesn’t seem to want to move. And I’ve told him forget about [meeting]. Frankly, we’re thinking about just taxing cars coming in from Canada. That’s the motherlode, that’s the big one.”
The president didn’t mince words over what he thought of Ottawa’s trade negotiators. “We’re very unhappy with the negotiations and the negotiating style of Canada,” he said. “We don’t like their representative very much.” He later added that Canada “has a long way to go” in the trade talks.
“I must be honest with you: We’re not getting along at all with their negotiators. We think their negotiators have taken advantage of our country for a long time. We had people that didn’t know what they were doing, and that’s why we had over the last five or six years, if you average it out, we had $800 billion a year in trade losses. It’s ridiculous. It’s not going to happen [under my administration].”
Although Trump told reporters that he has never liked NAFTA and refused to use the name, he didn’t answer a question over whether he would urge Congress to pull out of the 1994 agreement. But he called the tentative trade pact reached with Mexico last August “a very good deal” and said there was still a “good chance” that Canada would also sign on to what he termed the “USMC,” for the United States, Mexico and Canada. Without Canada, the president said the agreement would simply be known as the “USM.”
“Canada will come along. If Canada doesn’t make a deal with us, we’re going to make a much better deal. We’re going to tax the cars that come in. We will put billions and billions of dollars into our treasury. And frankly, we’ll be very happy because it’s actually more money than you can make under any circumstance with making a deal.”
According to various news media reports, a spokesman for Trudeau said “no meeting was requested” with Trump and declined to comment further. But Canadian Chamber of Commerce (CCC) spokesman Phil Taylor told NGI that trade talks “inevitably involve a lot of bluster and artificial deadlines.
“The clear-eyed facts are that the two countries remain at the negotiating table and have signaled that talks would continue past the deadline because, as U.S. Trade Representative Robert Lighthizer stated, Canada ‘is a huge trading partner for the [U.S].’ I think our membership has learned to take this sort of posturing in stride as long as the negotiations continue.”
Taylor added that while the CCC strongly supports a trilateral deal, “at this point, only the people in the room know the likely outcome of what Canada would and would not agree to as it relates to NAFTA 2.0.”
Canadian-American Business Council CEO Maryscott Greenwood said her organization was encouraging negotiators on both sides to reach an agreement by next Monday (Oct. 1).
“We think there is a chance of that to occur,” Greenwood said. “They are close, but it will require political effort in the next several days. We are not in favor of a bilateral deal with Mexico only. The economy of North America is built on a three-legged stool, and pulling one of the legs out jeopardizes the whole enterprise.”
Canada-United States Business Association President Mark High added “we’re probably running out of time to do something trilaterally now, but we think it’s inevitable that it will be a trilateral agreement eventually.”
The prospects for a trade agreement that excludes Canada remain uncertain. For weeks, lawmakers from both parties in Congress have expressed little enthusiasm for the idea. Three powerful business groups — the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers — also oppose excluding Ottawa, and said as much in a letter to Lighthizer this month.
Under U.S. trade law, the bilateral trade deal with Mexico must be published 60 days before it can be signed by both parties. The White House faces a Sunday deadline to meet that goal and give outgoing Mexican President Enrique PeÃ±a Nieto an opportunity to sign the accord. President-elect AndrÃ©s Manuel LÃ³pez Obrador is to take office on Dec. 1.
Strategist: Four Scenarios Possible
Cowen Washington Research Group strategist Chris Krueger said there are four likely scenarios for the trade kerfuffle, the most likely of which would be that Sunday’s deadline is missed and LÃ³pez Obrador, aka AMLO, would be required to sign any trilateral NAFTA 2.0 agreement.
“We remain cautiously optimistic for a deal with Canada on NAFTA 2.0 though the Sept. 30 ‘AMLO deadline’ looks increasingly like it will be missed,” Krueger said. “AMLO is a nationalist left wing firebrand who is a bit of a combination of Bernie Sanders and Donald Trump whose inclusion raises the political risks.”
That said, Krueger said observers “have lost track of how many deadlines have been missed with NAFTA. One more won’t really matter too much, though it definitely brings more risk. In terms of a Congressional coalition of the willing, the White House is expecting energy interests and organized labor to come out in favor, given the energy benefits in the U.S.-Mexico deal regarding settlement disputes with energy companies and the pro-union automotive rules of origin.”
The oil and gas industry is eager to preserve the investor-state dispute settlement (ISDS) provision of NAFTA. ISDS protects U.S. investors, including oil and gas companies, from unfair treatment or asset seizures by host nations.
The next likely scenario, Krueger said, is for Trump to move ahead with the bilateral deal with Mexico and initially call Canada’s bluff — with the goal of Ottawa joining the agreement later.
“Without Canada joining, we do not see how this new U.S.-Mexico deal will become ratified in the next Congress — regardless of who controls the House or Senate,” Krueger said. He added that under this scenario, PeÃ±a Nieto would sign the U.S.-Mexico language and AMLO would sign onto additional language for a U.S.-Canada component at a later date.
“This is perhaps a distinction without a difference, but likely an easier political move in Mexico City,” Krueger said. “The general idea is that Trump and Lighthizer send the U.S.-Mexico deal to PeÃ±a and the Congress and dare the Canadians to be left out in the cold only to see the Canadians fold following the Quebec elections on Oct. 1 and bend the knee.”
Less likely is a third scenario where Trump sends the Canadian prime minister and the Mexican president a written notice dissolving NAFTA, which would then become official six months later. According to Krueger, Article 2205 of the agreement makes it “very easy to void.” No Congressional approval is required, he said.
“There exists the uncomfortable reality of Trump’s view of NAFTA and the potential that this all ends in a raging dumpster fire,” Krueger said. “Trump has an instinctive hatred for multilateral deals with a special venom reserved for NAFTA first among all others. If we take Trump literally and seriously, this is the logical outcome that is hiding in plain sight.”
Krueger thinks the least likely scenario would be for Canada to cave by Sunday. It’s unlikely, he said, because dairy farmers “hold incredible sway” in Quebec, and any concession on dairy could impact the political fortunes of Trudeau’s Liberal Party.
“Still, if Canada comes to the table and agrees to a deal by Sept. 30, it makes passage in the U.S. a lot easier, but still hugely dependent on the midterms,” Krueger said. “If the GOP holds the majority (in our opinion a low probability), the deal will likely be approved. If the Democrats win the House, it is going to be a lot tougher.
“We obviously need to wait and see what happens in a final deal, but with high profile criticisms from business lobby groups and GOP senators, this is going to be a long slog.”
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