Washington: President Donald Trump didn’t indicate he was distressed when US-Canada trade talks broke down Friday, forcing the administration to move forward, for now, with a Mexico-only deal that the president is billing as a replacement for the North American Free Trade Agreement (Nafta).
“If we don’t make a deal on Canada, that’s fine,” Trump said at an event in Charlotte, North Carolina. He followed up Saturday morning with another Twitter jab: “I love Canada, but they’ve taken advantage of our Country for many years!” he wrote.
But although Trump isn’t promising to bend, he has a lot of incentives to get a Canadian deal done.
If he can get Canada on board with his Nafta plan by the end of September, he will have taken a major step toward a top economic promise from his campaign. And he can tell midterm voters that his negotiating strategy of tough talk and tariffs has driven foreign leaders to the bargaining table.
Perhaps more significant is what happens if Trump can’t patch things up with the US neighbour to the north. For starters, he would only have an agreement with Mexico, a “half-Nafta”. It’s unlikely to be enough to satisfy US Congress, and it would probably embolden the other trading partners Trump is currently at loggerheads with to dig their heels in, too.
Trump isn’t just negotiating with Canada; he’s also trying to outmanoeuvre the European Union and China on trade.
In addition to political fallout, there would be confusion and economic pain if there were suddenly no trade deal with Canada. Canada is the No 1 destination for American products shipped abroad, and more than eight million US jobs are supported by trade with Canada, according to the US Chamber of Commerce.
The 1994 version of Nafta remains in place for now to govern US-Canadian trade. Top US and Canadian officials continue to express optimism a deal can come together. Negotiations are set to resume Wednesday, which was sufficient to keep the stock market and most business leaders happy.
Getting Canada on board by August 31 would have smoothed the path for Trump’s next negotiations, but the more important deadline is 30 days later, when Trump needs to deliver the full text of a “new Nafta” to Congress. By then, Trump really needs Canada signed on, or it will be politically — and legally — tricky to move things through on his preferred timeline. Congress could dismiss the bilateral US-Mexico deal as not good enough.
The Trump administration is aiming to wrap up a deal with Canada in two weeks, a person familiar with the deliberations who is not authorised to speak publicly said. If the stalemate endures, the US side might ramp up pressure on the Canadians.
Trump’s biggest leverage over Canadian Prime Minister Justin Trudeau is auto tariffs. Trump has threatened to put 25 per cent tariffs on cars and auto parts sent from Canada into the US. Trump doesn’t need Congress’s permission to do that. While it would hurt both nations’ economies, Canada would probably suffer more, at least in the short term, economists say.
Canadian bank CIBC called Trump’s auto tariff the “sword of Damocles.”
Trump didn’t help trade talks Friday after his private remarks leaked out that he thinks the final deal will be “totally on our terms”, according to a report.