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With Trump’s new tariff threats, new NAFTA once again hangs in the balance


Ottawa, ON — Just as the fog of uncertainty shrouding North America’s new trade deal was starting to lift, Canada found itself socked in again Friday after U.S. President Donald Trump abruptly threatened Mexico with fresh tariffs tied to the influx of migrants at the southern border.

Vice-President Mike Pence had barely left Canadian airspace following a friendly, olive-branch visit to promote the trilateral agreement in Ottawa when Trump suddenly delivered his latest Twitter ultimatum to Mexico: stop the flow of immigrants or face more levies on your goods

“Mexico has taken advantage of the United States for decades,” the president said in a followup tweet Friday. “Because of the (Democrats), our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”

Unlike Trump’s steel and aluminum tariffs, which were ostensibly a national-security measure, the newest ones — five per cent on all Mexican exports beginning June 10, increasing by five per cent a month to a maximum of 25 per cent by October — would fall under the International Emergency Economic Powers Act, which the president invoked Thursday.

In a memo to clients, Ohio-based trade lawyer Dan Ujczo was unequivocal in describing the likely impact of Trump’s move on the effort to ratify the trade deal, known stateside as the U.S.-Mexico-Canada Agreement, or USCMA.

“It is difficult to envision a scenario where Mexico or the U.S. Congress will advance USMCA legislation with IEEPA tariffs in place,” wrote Ujczo, a cross-border expert with the firm Dickinson Wright.

“The likely delays that will follow in the wake of IEEPA tariffs will require Avengers-like ability to transcend space and time. ‘End Game USMCA’ may be on hold until this issue is resolved.”

It has been less than two weeks since the U.S. lifted the steel and aluminum tariffs, which both Canada and Mexico had said were standing in the way of ratifying the agreement — relabelled CUSMA by Ottawa, but known colloquially to most Canadians as the “new NAFTA.”

On Thursday, Pence was all smiles as he promised multiple times a concerted effort in Washington to get Congress to ratify the agreement, possibly by as early as late July. That optimism had all but evaporated Friday as the doubts that have permeated the effort to update NAFTA virtually from the outset settled back in — possibly for the long haul.

Trump and Trudeau spoke by phone Friday, but a description of the conversation released by the Prime Minister’s Office made no mention of the latest developments, noting only that the pair “reiterated their commitment to the new North American Free Trade Agreement and welcomed progress towards its ratification.”

Bruce Heyman, who was the U.S. ambassador to Canada under Barack Obama, expects the new agreement to be ratified eventually, but it might not happen before the 2020 elections, he told a gathering Friday to promote his new book, “The Art of Diplomacy,” an account written with wife Vicki of the couple’s tenure in the national capital.

The potential impact of Trump’s latest tariff tactic remains to be seen, he said.

“We don’t know if it’s actually going to happen — remember, this is the arsonist who then goes to put the fire out and says, ‘You’re welcome,’ “ Heyman said. “This is raw, this is new, this is hostile. But this is the way he plays.”

The former ambassador also laid out a scenario in which Trump, who has never made a secret of his hatred for NAFTA, makes good on his threat to begin pulling out of the original agreement in an effort to prod Congress and House Speaker Nancy Pelosi into approving the new one — a move that would give him helpful fodder on the 2020 campaign trail.

“The president will be blaming the Democrats for blowing up this great trade deal — ‘I told you I’d get rid of NAFTA.’ I can see this thing for his election: ‘I told you I’d blow up NAFTA, I told you I’d get rid of it. I did that for you. And I got you this really great deal, and it’s going to be amazing. And you know who threw that out? That was Nancy Pelosi and those Democrats. They ruined this.’ And that’s what I think is going to happen.”

For her part, Foreign Affairs Minister Chrystia Freeland, a central player in the federal Liberal government’s renegotiation efforts, refused to be drawn on the potential fallout.

“The question today is really a bilateral question, a bilateral issue between the United States and Mexico,” she said outside the House of Commons. “It deals with the border between the United States and Mexico. It is important to respect the sovereignty of our two neighbours, the United States and Mexico.”

But at the same time, Freeland said, Canada will move forward on ratifying the deal as the other two countries do — by implication, if one or both of them holds the agreement up, Canada won’t charge ahead.

The new continental trade agreement doesn’t kick in until it’s approved by lawmakers in all three countries.

Prime Minister Justin Trudeau introduced the bill that would do it in Canada earlier this week. The clock is ticking loudly, with just a few weeks before the House of Commons is to break for the summer. It’s not expected to sit again before the fall election. In Mexico, President Andres Manuel Lopez Obrador had just sent the new agreement to the Mexican Senate for approval later this year.

In Washington, Democrats on Capitol Hill say they want to see stronger enforcement measures for the agreement’s provisions on environmental and labour standards, with some even calling for the deal to be reopened.

—With files from The Associated Press

 


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