Will Trump Tear Up NAFTA? (Updated)

The latest spat between Trump and Mexico involves requirements for automobile manufacturing.

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Consolidated News Photos/Newscom

The future of free trade in North America is up in the air as the Trump administration's talks with Mexico and Canada continue to stumble.

U.S. Trade Representative Robert Lighthizer recently announced negotiations on the North American Free Trade Agreement would be pushed back into spring of 2018. But unofficial negotiations are already very much underway—and happening out in the open.

President Donald Trump has threatened to withdraw from the deal if Canada and Mexico aren't more conciliatory. This week, the Trump administration reiterated its hopes that a renegotiated NAFTA deal would require a higher percentage of automobiles' content are made in America. Mexican officials rejected the proposal, leading some to speculate if the president is willing to make good on his promises terminate the trade agreement. Meanwhile, congressional Republicans are trying to restrain Trump's eagerness to dump NAFTA, warning that it would cause economic troubles at home and unnecessary friction with America's neighbors.

Automobiles are at the center of the current spat. Under NAFTA rules, 62.5 percent of a car's component parts must come from Canada, Mexico, or the United States—if not, tariffs are triggered to protect North American production. The Trump administration wants the requirement bumped up to 85 percent, with 50 percent of the total originating in America.

The Mexican auto lobby called the proposal "unacceptable", claiming that the rule change would violate World Trade Organization rules.

Jorge Guajardo, a former Mexican Ambassador and a consultant for both U.S. and Mexican companies, told Yahoo Finance that Mexican businesses are preparing for a world without NAFTA, citing President Trump's anti-Mexican and anti-trade statements as the writing on the wall.

"Psychologically, Mexico has already accepted that NAFTA is coming to an end." Guajardo said.

The U.S. might be moving in the same direction. Lighthizer, recently claimed that withdrawing from the deal is something that he and the president "think about all the time," even though the administration has no specific NAFTA plan in place.

On the campaign trail, Trump denounced the trade deal with Canada and Mexico and threatened to terminate it if better conditions weren't met. He tweeted his grievances this past August, referring to NAFTA as "the worst trade deal ever made" and said termination was on the table.

As cracks in the trade deal grow, some congressional Republicans want to keep Trump and Mexican officials from tearing it all down. The collapse of NAFTA would cause economic pain, they warn.

In an interview with the Independent Journal Review, five Republican senators expressed concern over the prospect of pulling out of NAFTA. Sen. Lindsey Graham, R-S.C., called the prospect of American withdrawal a "disaster." Sen. Pat Toomey, R-Penn., remarked it would be "devastating" to both the American companies and workers.

"Economic protectionism hurts Americans, and we'd object to any move that would increase trade barriers and reduce the ability of Americans to buy and sell goods freely," A spokesman for Rep. Justin Amash, R-Mich., told Reason.

According to a study from ImpactEcon, an economic consulting company, American withdrawal from the trade deal with Canada and Mexico the reimposition of tariffs could cost an estimated 1.2 million jobs, hitting low-skilled labor hard.

Legal arguments are already being drawn up to block any attempt by the Trump administration to get rid of the trade agreement. But even if Congress is willing to assert itself, and Republicans are prepared to withstand Trump's bluster, their legal case is questionable.

Whether the president is willing to go through with it is anyone's guess. Trump tends to view renegotiation of America's trade agreements through a personal lens of deal-making prowess, with an interest in keeping the players off-balance.

When discussing KORUS, the U.S. trade agreement with South Korea, Trump told Lighthizer in order to get concessions, the South Koreans need to know he's willing to tear up the agreement.

"You tell them, 'This guy's so crazy he could pull out any minute,'" Trump went on to tell his staff. "And by the way, I might. You guys all need to know I might."

If Trump follows this pattern, the only thing certain regarding NAFTA is uncertainty.

This post has been updated to correct the attribution of a quote from Rep. Justin Amash's spokesman.

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  1. Get rid of all tarrifs. Even if other countries charge tarrifs on our exports, we should not charge tarrifs on their imports.

    1. I suppose you also won’t care if they slap tariffs on our current main export: JOBS.

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    2. Mah yerbs! Just think how many carriage & candle makers we would have in this country if it weren’t for lax import rules.

    3. “Get rid of all tarrifs. Even if other countries charge tarrifs on our exports, we should not charge tarrifs on their imports.”

      Honesty is such a lonely word
      Everyone is so untrue
      Honesty is hardly ever heard
      I don’t know the number of times I’ve pointed this out and gotten some TV ‘news’ anecdote about a guy losing his job in return.

  2. He’s channeling his inner Bernie Bro.

  3. They should let him tear up a copy of the NAFTA agreement, and then just not tell him that that’s not the same as formal withdrawal.

    1. Does it count if he pisses on the torn up paper?

    2. I was kind of hoping for that kind of thing with the nuclear football. Obama, briefing Trump, hands him a vintage See ‘n Say, and tells him never to point to the cow and pull the string unless he’s committed to all-out global devastation.

      I’m thinking Trump would figure it out right about the time he heard: “The cow says mooooooooo….”

      1. Meaning Obama never figured it out.

        1. Wisely, he never took it up past Duck.

  4. “Psychologically, Mexico has already accepted that NAFTA is coming to an end.” Guajardo said.

    “Told you Mexico would pay for the wall,” Trump tweeted.

  5. Will Trump Tear Up NAFTA?

    “‘Crunchbird’, my ass!”

    1. I haven’t heard that one in ages.

  6. There’s a lot more talk than thinking about this issue. First, NAFTA isn’t really Free Trade anymore than PPACA was Affordable Care. It’s purely a managed trade treaty.

    It’s probably a better agreement than what Trump would managed, but we shouldn’t lie to ourselves about what it is.

  7. So does anyone else need more evidence that NAFTA isn’t a free trade agreement, but a managed trade agreement?

  8. RE: Will Trump Tear Up NAFTA?
    The latest spat between Trump and Mexico involves requirements for automobile manufacturing.

    Trump probably will tear up NAFTA along with his pals, the republicans.
    Neither one really believes in the free market.

  9. “Automobiles are at the center of the current spat. Under NAFTA rules, 62.5 percent of a car’s component parts must come from Canada, Mexico, or the United States?if not, tariffs are triggered to protect North American production. The Trump administration wants the requirement bumped up to 85 percent, with 50 percent of the total originating in America.”

    I can tell you as someone who lived and worked in Brazil for a number of years that these types of “industrial policies” have worked miracles there.

  10. I knew Captain Edward Jellico from the TNG episode Chain of Command, and you Mr. Trump are no Captain Edward Jellico.

    1. You don’t know shit.

    2. Tony, you lost, loser. And you are such a loser, you are still whining almost a year later.
      I have a hint, loser: Grow the fuck up.

  11. If the Republicans a actually have a shit about free trade and had any balls, they would just legislate tarrifs back to the levels specified in NAFTA (or lower!). But that won’t happen. Due to that always present problem of concentrated benefits and dispersed costs, there is very little political incentive to cut anything that benefits a narrow constituency –
    including trade barriers. There is a reason these things are negotiated at the executive level – that is typically the only way to get around the protectionist incentives of legislative politics.

  12. Why is Trump wasting his time with NAFTA when it’s the SKYNETA that really needs to be terminated in order to reverse the Rust Belt’s judgment day?

  13. He won’t ditch the deal, too many red states depend on exports.

    Mexican political leadership say they’re mentally prepared for a Mexico without NAFTA, which tells you just how inept their government is. Mexico would be half dead without trade with America. Their economy would be nothing without us, to be honest.

    If Clinton was president, would she be real enthusiastic about expanding free trade? Her union pals always hated it. Either way Canada and Mexico should be serious about extending NAFTA.

  14. Mexico isn’t going to renegotiate even though about 1/3 of their economy depends on exports to the US. A few years ago, they decided to open their oil and gas extraction to foreign investors. They set aside about 20 proven fields for bidding, certain that their would be a bidding war. On the final day they were accepting bids, they had bids on only 2 fields, and all bids were substantially below their preset minimum bid. The joint venture agreement left the investors with all the costs and risks, but only 10% of any REVENUE generated, and Mexico thought that was a deal that no one could pass up.
    Mexicans don’t deal in reality!

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