The Trump administration is pressing Canada and Mexico for a swift deal on NAFTA in a bid to make trade peace with U.S. allies so it can focus on the rapidly escalating trade war with China.
U.S. President Donald Trump himself, however, is threatening to terminate the North American free-trade agreement if Mexico does not do more to stop the flow of people and drugs across its border to the United States.
The mixed messages from the White House come as Beijing confirmed plans on Monday for tariffs on $3-billion worth of U.S. goods, including aluminum, pork, wine and steel pipes.
The levies are retaliation for Mr. Trump’s decision to put tariffs on steel and aluminum and his plans for further levies against $60-billion worth of Chinese goods, ranging from airplanes to computer chips.
Markets shuddered, with the Dow Jones Industrial Average dropping 1.9 per cent.
With the fight against Beijing heating up, Washington has been eager to make peace on other trade fronts − a bid, sources say, to clear the decks so the administration can focus its efforts on its top trade adversary. U.S. Trade Representative Robert Lighthizer said last month he wanted to conclude NAFTA talks within six weeks. At the negotiating table, sources with knowledge of the talks have said, Mr. Lighthizer has offered to concede on key auto-content demands to make a deal happen.
One insider said Mexican officials told Mr. Lighthizer a mid-April deal would be possible. Canadian officials have said such a timeline is ambitious, but possible. Bloomberg reported on Monday that U.S. officials want NAFTA done in time for the Summit of the Americas in Peru on April 13 and 14.
Mr. Lighthizer and his Mexican counterparts also want the talks out of the way before the Mexican presidential election in July and U.S. congressional midterms in November. Mr. Lighthizer must also persuade Congress to renew the administration’s power to negotiate trade deals, the Trade Promotion Authority (TPA), which expires this summer.
Any deal on NAFTA reached this month would only be high-level and preliminary, with many details to be fleshed out later.
China, a much larger target for the United States, differs from Canada and Mexico in that the international community widely agrees on the problem to be addressed: It routinely forces foreign companies to give up their proprietary technologies as a condition of doing business there.
“Most of the world tends to side with the United States on this one,” said Jorge Guajardo, a former Mexican diplomat who served as ambassador to China. “People are waking up to the fact that trying to play fair with China leads nowhere. I believe that China will come to terms with the fact that business as usual won’t work.”
Mr. Trump, however, has undermined his administration’s efforts on NAFTA, threatening to torpedo a deal if Mexico did not do more to stop migrants and criminal cartels trying to get to the United States.
“They must stop the big drug and people flows, or I will stop their cash cow, NAFTA. NEED WALL!” he tweeted on Sunday. On Monday, Mr. Trump accused Mexico of “making a fortune on NAFTA” by taking money from the United States.
The outburst followed reports on Fox News about a large group of Hondurans travelling through Mexico to the U.S. border.
Both Canada and Mexico brushed off the threats. In an e-mail, Foreign Minister Chrystia Freeland’s spokesman, Adam Austen, said the government wants to conclude a NAFTA deal “as soon as possible.”
Geronimo Gutierrez, Mexico’s ambassador to the United States, said in a statement that “there is a lot of political sensitivity in the three countries and this is why we should remain focused” on reaching a deal.
Daniel Ujczo, an Ohio-based international trade lawyer, said the White House knows its best shot at getting a pact is this month. “The Trump administration has its maximum leverage in April and will try to get a deal done,” he said.
Beijing released a list of $3-billion worth of U.S. goods that will be hit with tariffs. Scrap aluminium and pork will face levies of 25 per cent. Tariffs will be 15 per cent for products including metal tubes, oil and gas drilling equipment, wine and fruit.
Mark Warner, a Toronto-based trade lawyer, said the tariffs could be a double-edged sword for Canada. While they might open up opportunities to supply more agricultural goods to China, the cost of imports from the United States could increase, or cheaper Chinese goods could flood into Canada.
“The downside for us is mostly on the import side, whether through Chinese dumping or higher input prices given current supply chains through the U.S.,” Mr. Warner said.