Trade experts, lawmakers, and investors panicked across the board Wednesday night after Reuters reported Canadian officials were increasingly convinced President Donald Trump is planning to withdraw from the North American Free Trade Agreement.
That report seems to have been a false alarm for now, but the response it provoked revealed another possibility: Is Trump less likely to leave NAFTA now than he was several months ago?
Pat Roberts (R-Kansas), chairman of the Senate Agriculture, Nutrition, and Forestry Committee, told THE WEEKLY STANDARD Wednesday night that he has discussed the important role NAFTA plays for farmers in his state at length with Trump several times in the past few weeks, and that he was encouraged by his response.
“I told the president that it would be a paradox of enormous irony that during this time when we passed the tax bill and we’re experiencing economic growth, that we all of a sudden find ourselves in a foreign recession that could dry all that out,” Roberts said. “So, he understands it, and he listened.”
Congressional Republicans expressed their firm support for keeping NAFTA intact throughout Trump’s first year in office, but their pleas didn’t do much to curb Trump’s blustering threats to withdraw from the trade agreement on numerous occasions after he first announced last February he would seek to renegotiate the deal with Canada and Mexico.
Recently, though, some lawmakers and trade experts think they might have finally gotten through to him — but it’s anyone’s guess how long that could last. For now, Trump is sending signals he won’t make a decision out of the blue: he told Wall Street Journal in an interview Thursday that he would be “a little bit flexible” on the possibility of withdrawing from NAFTA until after Mexican elections in July.
Tom Donohue, president of the U.S. Chamber of Commerce, which has extensively lobbied Congress and the administration in favor of NAFTA, said in an interview with Bloomberg Wednesday that the odds of Trump pulling out of NAFTA are now “much less than it was six months ago.”
“They’re getting smarter on this,” Donohue said of the White House’s trade strategy.
Why the shift? Donohue argued that agricultural interests have become louder about the critical role NAFTA plays in enabling exports of American produce and suggested Trump has gotten their message, citing his Nashville address to the American Farm Bureau earlier this week.
“On NAFTA, I am working very hard to get a better deal for our country and for our farmers and for our manufacturers,” Trump said in his remarks, this time omitting his common suggestion that he may end up leaving the trade agreement regardless. “It’s under negotiation as we speak,” he told the crowd.
Indeed, senators from agricultural states have stepped up their outreach efforts to the White House in recent days, meeting with Trump in December and again last week to outline how farmers in their states rely on NAFTA.
“I have tried to educate him the best I can,” Iowa Republican Sen. Joni Ernst told TWS.
Fellow Iowa Republican Sen. Chuck Grassley also released a statement on Tuesday urging the administration to protect farmers by keeping the deal intact.
“As the Administration continues to renegotiate NAFTA, I expect President Trump to keep the pledge he made today to make trade deals that don’t harm agriculture,” Grassley wrote. “That will be a major test of his presidency’s impact on rural America going forward.”
Apart from reiterating to Trump the enormity of the situation—nearly 14 million American workers rely on trade with Canada and Mexico—supporters have also pointed to potential damage to the stock market that could ensue.
Roberts told TWS he warned Trump that getting rid of NAFTA would send shivers throughout the entire farm economy, “and I think we’d see an immediate response in the stock market.”
NAFTA advocates who argued the stock market would respond negatively if Trump were to leave the pact were vindicated Wednesday afternoon when markets quickly took a hit after the Reuters story came out.
Trump has boasted about remarkable stock market performances frequently this month, tweeting last week that the Dow Jones passing 25,000 should be the “biggest story on earth!”
Republicans have also made clear they intend to campaign on economic growth and their tax bill leading up to midterm elections this November, and several GOP lawmakers told TWS they believe pulling out of NAFTA would undermine that campaign strategy.
“There’s real concern in the manufacturing committee and the agricultural committee that [leaving NAFTA] would impact the economy in a very negative way,” Sen. John Boozman (R-Arkansas) said.
Scrapping NAFTA would not only damage GOP campaign plans, but it would also be likely to set off a fierce legal battle over whether or not Trump has the unilateral authority to make the decision without congressional approval.
And the departure would not be immediate — Trump would have to wait a required period of six months after giving notice of withdrawal before the United States would actually be able to do so — potentially causing months of economic uncertainty for some of Trump’s most ardent supporters in rural areas during an election year which already presents an uphill climb for Republicans.
But the clock is ticking for trade negotiators to reach a deal before political pressures posed by impending elections in Mexico and the United States poison the talks.
GOP lawmakers view Trump’s threats more as a negotiating tactic than a serious consideration, but Trump has proven his willingness to pull the trigger on impactful policy questions without much warning in the past. Whether his view of the trade deal has changed at all in light of intense lobbying efforts from agricultural and business interests remains to be seen.
Officials from the three countries will meet for another round of negotiations in Montreal later this month.
“Everybody’s for opening a better trade deal, but you don’t want to push Humpty Dumpty off the wall,” Roberts told TWS. “You can’t ever put it back together.”
