Don’t look now, but the Trump administration could be close to reaching a trade agreement with Mexico, following last week’s announcement of a deal with the European Union.
A deal with Mexico to revamp the North American Free Trade Agreement (NAFTA) would represent a serious cooling of trade hostilities with U.S. allies following a summer of sharp criticism by President Trump.
Politico and Inside U.S. Trade reported on Monday that technical negotiators from Mexico are due in Washington today for trade talks, to be followed by meetings Thursday and Friday between Mexico’s economics minister and U.S. Trade Representative Robert Lighthizer.
Meanwhile, U.S. Commerce Secretary Wilbur Ross said Monday: “Our immediate, most close-to-completion negotiations are with NAFTA, particularly with Mexico. … There’s a pretty good chance that we could be on a pretty rapid track with the Mexican talks.”
Curiously absent from the NAFTA renegotiation talks has been Canada. The Trump strategy appears to be to cut a deal with Mexico then pressure Canada to join. Lighthizer told Congress last week: “My hope is that we will, before very long, have a conclusions with respect to Mexico and that as a result of that, Canada will come in and begin to compromise.”
One of the biggest sticking points on renegotiating NAFTA has been the Trump administration’s insistence that auto imports from Mexico have 40 percent of their components sourced from high-wage countries to qualify for preferential tariff treatment. That would discourage companies from importing cheap parts from China and elsewhere, assembling them in Mexico, and shipping them to the U.S. duty-free—a requirement that could help U.S. manufacturers but could also raise the price of cars to U.S. consumers.
The head of Canada’s auto parts manufacturing association told Reuters that he “wouldn’t be surprised if the Americans and the Mexicans came to some resolution on that piece (autos) and then the Americans flip it back to Canada and say, ‘Take it or leave it.’”
Trump has also pushed for a sunset clause and for greater access to Canadian agricultural markets. A NAFTA deal, following the EU deal, would represent agreements in principle with three of the United States’ four biggest trading partners and could result in the elimination of steel tariffs. The biggest country missing would be China, which countries around the world have criticized for unfair trade practices.
Of course, you never know what will happen with this White House. But if it reaches a negotiating breakthrough on NAFTA, expect a quick claim of political victory. That’s what happened last week with Trump’s deal with the EU: As my colleague Haley Byrd pointed out, actual achievements were thin and less ambitious than previous trade talks Trump abandoned upon taking office.
Trump has often railed against NAFTA, threatening to pull out of it and calling it a “total disaster” and a “very bad deal” that’s “the worst trade deal maybe ever signed anywhere.” But there will be scrutiny of any Trump NAFTA deal, too. It requires approval from Congress.
