Canada Might Nix Trump's NAFTA Deal Unless He Stops Steel Tariffs

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Trump's trade deal scorecard might drop to zero unless Trump halts tariffs on Canadian steel and aluminum.

With much fanfare Trump bragged about the USMCA replacement for NAFTA. Canada still has not ratified that agreement, and perhaps won't at all.

The Wall Street Journal reports Canada Links Trade-Deal Approval to Steel Tariffs.

Canada’s foreign minister indicated Monday the government might delay ratification of the revised North American free-trade deal until the Trump administration lifts its tariffs against Canadian steel and aluminum. “The existence of these tariffs for many Canadians raises some serious questions about ratification,” said Ms. Freeland, in Washington to meet with U.S. Trade Representative Robert Lighthizer and members of Congress.

Given the scandal-fueled political atmosphere and other pieces of legislation on the agenda, Canadian political watchers have said getting the trade deal ratified before summer would prove difficult—and politically unwise given the steel and aluminum tariffs and general animosity in Canada toward President Trump.

Pelosi May Sink the Deal on the US Side

It's not just Canada that may nix this deal. Also consider New Nafta Is Threatened by Partisan Split Over Enforcement

Led by House Speaker Nancy Pelosi, Democrats want the administration to add provisions to last year’s pact with Canada and Mexico that will ensure Mexico enforces environmental protections and allows its workers to form unions freely.

“Right now, the president’s Nafta update can’t be enforced,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate committee that oversees trade. “No matter how good a deal looks on paper, it doesn’t mean much if you can’t make sure the other countries live up to their end of the bargain.”

The USMCA requires ratification in the House and Senate as well as legislatures in Canada and Mexico before it could replace the original Nafta that took effect in 1994.

If Mrs. Pelosi’s party remains unified, she could block consideration of USMCA, either by changing the rules of the House or triggering a mechanism inserted by Mr. Wyden into the fast-track trade law—which governs how trade pacts are passed—that would prevent the agreement from getting expedited consideration

Trump's Trade Deal Scorecard

The self-alleged best deal maker in history does not have a single ratified deal in two years.

Instead, he has infuriated Canada, Germany, and the EU in general.

When Trump backed out of the Trans Pacific Partnership (TPP) he put US farmers at a serious disadvantage in selling agricultural goods to Japan.

By the way, even if USMCA is ratified by the US, Canada, and Mexico, for the US, the Changes are Trivial.

Viewed in that light, Trump's scorecard is zero even if this passes.

How to Not Make Deals

  1. Infuriate allies
  2. Not understand trade is a two-way street

Trump views every deal as having a winner and a loser and he insists on winner every time.

In reality, both sides have to benefit or there would not be deals.

Results Speak

And let's not forget the result of his tariff actions to deduce the trade deficit.

The most likely way Trump "succeeds" at reducing the trade deficit is via recession.

For discussion, please see Mission Impossible: Tariffs Didn't Reduce the Trade Deficit (Deals Won't Either).

Mike "Mish" Shedlock

Comments (9)
No. 1-4
KidHorn
KidHorn

How about we have a trade deal that is no deal? We let everyone make whatever they want and sell it whomever they want at whatever price they want.

Seems like it would produce more jobs in Mexico, which would reduce illegal immigration. A double win.

Brother
Brother

So why is the trade deficit so lop sided?

Realist
Realist

“No matter how good a deal looks on paper, it doesn’t mean much if you can’t make sure the other countries live up to their end of the bargain.” How true. The US has been reneging on softwood lumber trade deals with Canada over and over again for decades. Trump often renegs on deals within hours or days of making them. Trump is using ”National Security” to prevent cars and washing machines from entering the US in order to get around trade rules. I see no point in anyone signing a trade deal with the US when the US can't be trusted to honour their agreements.

Mish
Mish

Editor

Stuki - the full Balance of Trade report does include services