Trump Thinks NAFTA Will Be Terminated; Industry Observers Not So Sure

President Donald Trump thinks NAFTA can’t be renegotiated, and will eventually be terminated, he said Aug. 22 during a rally in Phoenix. “Personally, I don't think we can make a deal, because we have been so badly taken advantage of,” Trump said. “They have made such great deals, both of the countries, but in particular, Mexico, that I don't think we can make a deal. So I think we'll end up probably terminating NAFTA at some point, OK? Probably.” Trump reminded the audience of repeated pledges to either renegotiate NAFTA or terminate it if renegotiation fails. He said in April he was considering issuing an executive order to remove the U.S. from the deal (see 1704260049). “I personally don't think you can make a deal without a termination, but we're going to see what happens, OK? You're in good hands, I can tell you,” he said in Phoenix.

Trump’s statement could disrupt talks, Stimson Center distinguished fellow Bill Reinsch said in an email. “Hopefully, nobody will pay any attention at this early point,” he said. But Dan Ikenson, director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, sees Trump’s “threat” as “barely credible,” after industry, particularly the agriculture business, has asserted “there will be hell to pay” if Trump attempts to withdraw, Ikenson said in an email. “The Canadians and Mexicans no longer take Trump's threats seriously either. They see him for what he is: A childish blowhard.”

A spokesman for Canadian Foreign Minister Chrystia Freeland dismissed any notion that Trump’s statement would affect negotiations. “As we said last week, trade negotiations often have moments of heated rhetoric,” the spokesman said. “Our priorities remain the same, and we will continue to work hard to modernize NAFTA, supporting millions of middle class jobs.” Likewise, Mexican Foreign Affairs Secretary Luis Videgaray Caso showed a game face, tweeting that there were “no surprises” from Trump’s words as the negotiation is ongoing. “Mexico will remain at the table with serenity, steadfastness and the national interest at the forefront,” he said.

U.S. Trade Representative Robert Lighthizer in an emailed statement backed up Trump, noting the president’s previous pledges to remove the U.S. from the agreement if circumstances dictate. “President Trump has been clear from the very beginning that if the NAFTA renegotiation is unsuccessful, he will withdraw from the agreement,” Lighthizer said in a statement. “Under the President's direction, USTR has begun renegotiating NAFTA to seek substantial changes that address its fundamental failures and create fair trade policy that benefits all Americans." NAFTA parties met in Washington for the first round of negotiations Aug. 16-20, and are set to meet in Mexico for the second round Sept. 1-5.

Trump’s words “could play both ways,” Center for Strategic and International Studies Americas Program Deputy Director Richard Miles said in an Aug. 23 interview. U.S. negotiators could conceivably be concerned that Trump’s statement will imperil the seriousness of Canada’s and Mexico’s negotiating approaches, potentially prompting them to seek language to satisfy only domestic political constituencies at the sacrifice of adopting more serious, engaged negotiating positions, he said. “I guess, on the other hand, [the U.S.] could say that, ‘Well, look, you either deal with us, or the boss pulls the plug on this,’” Miles said. “But I don’t know that that’s going to work.”

Trump’s statement, “by itself,” doesn’t have any impact on talks, Jim Moore, managing director of Georgetown University's Business, Society, and Public Policy Initiative, said in an interview. While the words probably aren’t indicative of any negotiating strategy by the U.S., they indicate that NAFTA is one of a few major campaign promises still motivating Trump, he said. “But then, he’s got to come back to Washington and figure out how you forge a coalition between government and business, and then how you sell it to the Congress, and so it’s a little bit more intense than one would superficially think,” Moore said. “That’s for sure.”