The White House launched a round of strong-arm tactics Tuesday when Vice President Mike Pence called Justin Trudeau and issued an ultimatum: A reworked NAFTA deal would need to be renewed every five years. In response, Trudeau canceled a trip to the U.S.
Then on Wednesday, the Trump administration announced surprise steel and aluminum tariffs on Canada and Mexico. And on Thursday and Friday, President Donald Trump bashed Canada’s trade practices.
The White House is hoping the campaign of aggression will cause Canada and Mexico to cave as talks to renegotiate the 25-year-old NAFTA agreement are plagued by standoffs and delays. But instead, the moves could backfire as Canada and Mexico retaliate with their own tariffs, leading to a stalemate that would result in Trump pulling out of NAFTA altogether.
Even by the most optimistic calculations, only a few weeks remain before a window closes for lawmakers to consider a deal this year. A complicated timeline of events must take place to get the deal through Congress. In addition, the Mexican presidential elections are about a month away, leaving the current administration there with little wiggle room to make big concessions.
And now both Canada and Mexico may be in no mood to deal.
“We had been very specific, both Canada and Mexico, that we would not negotiate with a gun pointed to our heads,” said Jorge Guajardo, a former Mexican ambassador who now works as a senior director at McLarty Associates in Washington. “That’s exactly what they are doing now.”
Trudeau told reporters Thursday that he canceled plans to travel to the U.S. for NAFTA talks this week after Pence called him and insisted that any deal would be on a course to expire in five years unless all three countries agreed to keep it going — a total nonstarter all along for the Canadians and Mexicans.
“I had to highlight there was no possibility of any Canadian prime minister signing a NAFTA deal that included a five-year sunset clause,” the normally placid Trudeau said at a press conference where he called the steel and aluminum tariffs an “affront” to the neighborly relationship.
The Trump administration wanted to wrap up talks months ago to make good on the president’s campaign pledge to wrest a better deal for the U.S. But the sides have reached a stalemate on a host of issues in addition to the sunset clause the U.S. wants, which would automatically terminate the deal after five years unless all three countries decided to keep it going.
Other hangups include automotive rules of origin, government procurement and how to handle investment disputes. For many months, Canada and Mexico criticized U.S. proposals on those issues as “unworkable.”
Commerce Secretary Wilbur Ross said on Thursday the delayed NAFTA talks were to blame for the steel and aluminum tariffs. Canada and Mexico would be hit with the duties because negotiations were “taking longer than we had hoped,” he said.
“There is no longer a very precise date when they may be concluded, and therefore they were added into the list of those that will bear tariffs,” Ross told reporters.
In the wake of Trudeau’s comments about his phone call with Pence, Trump released a statement heaping scorn on Canadian trade practices. Trudeau was told “the United States will agree to a fair deal, or there will be no deal at all,” the president said on Thursday.
On Friday, Trump continued his attacks. “Canada has treated our Agricultural business and Farmers very poorly for a very long period of time,” he tweeted.
The frosty relations raise the specter that Trump may ditch the pact altogether — even though he has often repeated the threat and he has been warned repeatedly by many Cabinet advisers and GOP leaders that a withdrawal would harm crucial farm states that depend on trade. But his administration’s continued frustration over a lack of NAFTA progress that led him to impose the duties suddenly could similarly lead him to discard the deal entirely.
For now, negotiations are proceeding at the technical level, but now they’re also under the cloud of retaliatory tariffs from both neighboring countries.
Starting July 1, Canada will impose duties on about $12.8 billion worth of U.S. imports. The tariffs will target steel and aluminum imports from the U.S., but also agricultural and manufactured goods like cucumbers, laundry detergent and mattresses.
Mexico also said it would impose tariffs on $8 billion in American pork, blueberries, lamps and other goods. Mexican Economy Secretary Ildefonso Guajardo told reporters on the sidelines of a summit in Paris that his government is taking the action under the rules of NAFTA, which will allow the country to impose its retaliatory tariffs immediately, as soon as early next week.
“Whatever they do in terms of trade actions that affect trade flows will be countered by a similar way of action from Mexico,” Guajardo said. “But Mexico will continue at the negotiating table in an open dialogue to try to reach a solution that is in the best interest of Mexico and our trading partners.”
The tariffs and the countermeasures will affect the tenor of the trade negotiations among officials who are walking into talks “knowing that their government has basically just been put on the defensive,” said Vanessa Sciarra, a former U.S. trade negotiator who now works as a vice president at the National Foreign Trade Council.
"Those people have to have a relationship in order to make progress, so when you introduce these irritants into the relationship, it tends to make that negotiating dynamic more chilly,” she said.
And there’s less incentive for Canada and Mexico to agree to the Trump administration’s terms on NAFTA if there’s a risk Trump will still impose tariffs on them. The duties he announced this week were imposed to protect national security, under a law outside of NAFTA.
“The world now knows that any deal the U.S. enters into is based on the whims of the president at the time,” said Guajardo, the former ambassador. “And when you have a capricious president like President Trump, there’s just no incentive for any country to try to enter into an agreement with the United States.”
Hans von der Burchard contributed to this report.