In a slightly surreal and awkward press conference held in the Oval Office Monday, Donald Trump announced that the United States and Mexico had reached a preliminary deal to revise pieces of the North American Free Trade Agreement, then suggested that Canada might not be included in the final pact.
Trump did not share details of the agreement with Mexico, but the largest changes reportedly focus on the auto industry and are theoretically designed to bring more car manufacturing back to the U.S. In order to qualify for tariff-free treatment under the new NAFTA, more of a vehicle’s parts will need to be produced in North America, and a certain share will for the first time need to be built by workers making at least $16 an hour.
Whether this will be enough to satisfy longtime critics of the trade pact remains to be seen. Longtime NAFTA skeptic Robert Scott of the labor-backed Economic Policy Institute told me there was little sign Trump’s team had made progress on key issues: “It’s a press release in search of a real deal.”
To sell it, Trump stuck mostly to bluster and hyperbole during his brief talk. The president got things started by announcing that it was a “big day” for trade, then puzzlingly suggested that NAFTA was ready for a name change.
“They used to call it NAFTA. We’re going to call it the United States–Mexico Trade Agreement,” he said. “We’ll get rid of the name NAFTA. It has a bad connotation because the United States was hurt badly by NAFTA for many years. And now it’s a very good deal for both countries.”
This seemed to be Trump’s way of hinting that he was ready to break up NAFTA into separate trade deals with Canada and Mexico—a controversial idea that would likely go down poorly with Congress and the business community, given that companies have built their North American supply chains to move goods around a single tariff-free zone, but that some members of his administration have hinted at before. When outgoing Mexican President Enrique Peña Nieto joined Trump on speakerphone , he politely urged Trump to keep Canada in the deal.
“It is our wish, Mr. President, that now Canada will also be able to be incorporated in all of this,” Peña Nieto said through a translator.
This dance continued throughout the call, with Trump dangling the idea of booting Canada and Nieto restating that he hoped Canada would be “integrated into this process.” Talks between Ottawa and Washington have been on hold for a bit, but Trump promised that negotiations would start up again “shortly.”
“We can have a separate deal [with Canada] or put it into this deal,” he said. “I like to call this deal the United States–Mexico Trade Agreement. I think it’s an elegant name. I think NAFTA has a lot of bad connotations for the United States because it was a rip-off.”
The president also suggested that if Canada did not negotiate revisions to NAFTA or a separate bilateral pact, he’d exact revenge by slapping tariffs on its auto industry. The White House has been weighing whether to levy taxes on foreign cars under the pretext of national security, much the way it did with foreign steel and aluminum.
“They want to negotiate very badly. But either way we have a deal with Canada. It will either be a tariff on cars. Or it will be a negotiated deal. And frankly a tariff on cars is a much easier way to go. Perhaps the other would be much better for Canada.” (Translation: “Nice auto industry you have there. Would be a shame if something happened to it.”)
As of now, it’s not clear that any of the administration’s key trade officials aside from Trump are seriously considering the idea of splitting NAFTA into pieces; it seems entirely possible that the president’s threats are just a negotiating posture meant to frighten Canadian officials into making concessions. Alternatively, Trump could also be expressing a sincere desire to jettison NAFTA in favor of two-way deals that his underlings don’t really share. Or maybe he’s just laying the groundwork to rename the thing once it’s been tweaked. One can only speculate.
Trump did take a pause from taunting our northerly neighbor to engage in a bit of self-aggrandizement, at one point suggesting that the preliminary agreement with Mexico was “one of the largest trade deals ever made, maybe the largest trade deal ever made.” This is obviously untrue. After all, NAFTA currently includes Canada, which this handshake agreement does not.
