Moneybox

Trump Says He’ll Only Drop His Steel Tariffs if Canada and Mexico Renegotiate NAFTA. Bad Move.

DUISBURG, GERMANY - MARCH 05: Trains with scrap metal stay in front of the Huettenwerk Krupp Mannesmann GmbH steel mill on March 5, 2018 in Duisburg, Germany. Tensions between U.S. President Donald Trump and the European Union are rising after Trump announced he would respond to any E.U. tariffs on American goods with U.S. tariffs on European cars. Trump originally sought tariffs on imports of steel and aluminum, to which EU officials said they would respond with tariffs on U.S. jeans, motorcycles and bourbon. The European Union and Canada are the two biggest exporters of steel to the United States. (Photo by Lukas Schulze/Getty Images)
Scrapped metal.
Lukas Schulze/Getty Images

When Donald Trump announced his intent to slap new tariffs on foreign steel and aluminum last week, critics were quick to point out that the biggest victims of such a move would be important allies including Canada and Mexico. In our president’s mind, however, that seems to be a feature of the plan, not a bug. Over the weekend, administration officials insisted that no countries would be spared from the new duties. And on Monday morning, Trump himself shared some insight into his strategy:

In other words, POTUS seemingly wants to bludgeon Canada and Mexico into accepting changes in NAFTA by putting tariffs on one of their major exports to the U.S. This is the sort of thing that, if true, was probably best left unsaid.

Trump’s tweets put the governments of Canada and Mexico in an awkward position. Before tariffs were an issue, all three countries could at least pretend they were trying to negotiate some sort of win-win compromise. Now, if our neighbors make consolations on NAFTA, it will look as if they are caving to Washington’s bullying tactics, which will almost certainly play poorly with voters back home. Maybe that’s Trump’s intention; perhaps he is trying to throw yet another wrench into the NAFTA-bargaining process in order to finally kill the pact. Or perhaps he’s thinking just the opposite; it’s possible he’s worried that the tariffs aren’t playing well enough with the public and hopes that tying them to an inevitable deal with Canada and Mexico will give him an excuse to drop the whole ill-conceived lark while still claiming victory. You can only guess with Trump. But by ostensibly resorting to blackmail, the president may be making it politically harder, not easier, to strike an accord.

The president’s loose thumbs aren’t doing the administration any legal favors, either. Trump plans to impose the new tariffs under a law—Section 232 of the Trade Expansion Act—that gives him broad powers over trade specifically in order to protect national security. As part of that process, the Commerce Department has produced two elaborate reports arguing that the steel and aluminum industries need to be protected for the sake of American safety and well-being. But by telling Canada that it might be able to get rid of the tariffs by letting U.S. dairy farmers sell more milk in Toronto, Trump is making a mockery of that carefully wrought legal fiction. After all, if the health of the steel and aluminum industries were actually essential to U.S. security interests, the president probably wouldn’t be willing to barter them for butter sales.

This point will almost surely come up if companies sue to stop the tariffs in U.S. court. Just as importantly, it will also put the Trump administration on weaker footing before the World Trade Organization. The body’s rules allow member states to take protectionist measures for national security purposes; they do not allow members to randomly put up tariffs as a negotiating tactic. If countries want to do such a thing, they need to find a separate excuse for their actions. Trump’s trade team was hard at work on that effort. But the president is blowing their cover.