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Trump May Dismantle NAFTA in Favor of Two Separate Deals

The North American Free Trade Agreement as we know it is in extra hot water this week as relations between the involved nations further deteriorate and President Trump renews talk of opting for bilateral trade deals instead.

The NAFTA negotiations have been dragging on and on as the U.S. puts substantial demands on the table that Canada and Mexico haven’t been on board with, and Trump’s moves—in whatever form they take—to put America first, have simultaneously served to alienate the nation’s key allies.

With relations increasingly deteriorating and negotiations making little, if any, progress, Trump appears to be mulling a move away from the trilateral trade agreement in favor of two separate deals.

“His preference now, he asked me to convey this, is to actually negotiate with Mexico and Canada separately,” White House economic adviser Larry Kudlow said in an interview with Fox News Tuesday, referring to Trump’s current considerations. “I know this is just three countries but still, you know, oftentimes when you have to compromise with a whole bunch of countries, you get the worst of the deals.”

The perspective that the U.S. has suffered at the hands of imbalanced trade deals has been Trump’s impetus for the actions he’s taken on trade. All within a week, the president said he would proceed with 25 percent tariffs on $50 billion worth of goods from China, for which the list of targeted items is slated for release June 15, and removed an exemption he had granted for Mexico, Canada and the EU for tariffs on imported steel and aluminum.

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A White House issued statement in line with last week’s action said, “The United States was unable to reach satisfactory arrangements, however, with Canada, Mexico, or the European Union, after repeatedly delaying tariffs to allow more time for discussions.”

Since then, Canadian Prime Minister Justin Trudeau has responded calling Trump’s play “an affront” to Canada, and has issued a list of retaliatory tariffs on up to 16.6 billion Canadian dollars ($12.86 billion) of U.S. imports, including a match on the 25 percent steel tariff and 10 percent tariffs on other American products, like handkerchiefs, tablecloths, sleeping bags, bobbins for winding textile yarn. The tariffs will take effect as of July 1.

In an interview with CNN Sunday, Canadian foreign affairs minister Chrystia Freeland said of the retaliation, “This is the strongest trade action Canada has taken since the second world war. It is perfectly reciprocal and balanced, so this will be a dollar for dollar retaliation. Our action is legal under WTO rules responsively, and I want to point out that the U.S. action which provoked this Canadian response, is illegal under the rules of the international trading system.”

On Tuesday, Mexico levied its own retaliatory trade tariffs on roughly $3 billion worth of U.S. products, including steel, pork, cheese and bourbon. The tariffs take effect immediately.

U.S. pork producers, which send the majority of their meat to Mexico are up in arms over the move, despite Trump’s promises to protect them.

Just ahead of Mexico’s tariff announcement, Trump tweeted, “Farmers have not been doing well for 15 years. Mexico, Canada, China and others have treated them unfairly. By the time I finish trade talks, that will change. Big trade barriers against U.S. farmers, and other businesses, will finally be broken. Massive trade deficits no longer!”

There have been no new tweets or official statements addressing Kudlow’s comments, but Trump had already alluded to negotiating with Canada and Mexico separately. Both nations, however, have noted their opposition to the idea.