Trump and NAFTA: Path of Negotiation and Reinvention

POLITICAL WILL

Officials say a handful of less contentious NAFTA chapters could still be concluded during the latest round of talks, and three people at the talks said the technical teams remained focused on their tasks, despite the uncertainty the steel tariff plan had caused.

Negotiators from the three countries have been meeting for six months and made few concrete announcements.

Expectations of progress at the seventh round in Mexico City had already been tempered by the conviction that major problem areas were unlikely to be removed without the mediation of senior political figures.

The risk of a tariff war between the NAFTA partners threw up new roadblocks.

Mexican steel industry association Canacero said it expected the government to take “immediate reciprocal actions” if the United States slapped the tariffs on Mexico, and agricultural lobbyists at the NAFTA talks also condemned the tariff plan.

Trump has repeatedly threatened to pull out of NAFTA if the deal is not recast to his liking, arguing that it has caused an exodus of U.S. manufacturing jobs to lower-cost Mexico.

Blindsided by Trump’s steel announcement, participants at the talks are looking ahead to Monday’s scheduled meeting between U.S. Trade Representative Robert Lighthizer, Canada’s Foreign Minister Chrystia Freeland and Mexico’s Economy Minister Ildefonso Guajardo for clarity on the path forward.

“It’s not a question of what’s achievable. Of course it’s achievable,” said one industry executive in Mexico close to the negotiations. “It’s a question of political will.”

By exempting Mexico and Canada from new tariffs, President Donald Trump is hoping to incentivize those nations to strike a fair deal on the North American Free Trade Agreement, Commerce Secretary Wilbur Ross told CNBC on Thursday

“There’s no question that the action the president took today is a further motivation to both Canada and Mexico to make a fair arrangement with the United States,” he said in an interview with “Closing Bell.”

“This is not being done, though, just as a negotiating ploy,” he added.

Trump has repeatedly threatened to pull out of NAFTA if the nations can’t find a way to overhaul the pact.

On Thursday afternoon, the president signed off on tariffs that slap a 25 percent levy on steel imports and a 10 percent charge on aluminum. Canada and Mexico are exempt from the tariffs, which will take effect in 15 days. The U.S. will also give other nations the opportunity to justify why they shouldn’t be included.

“We are deadly serious about solving the problem in steel, aluminum and, as the weeks and months go by, other industries,” Ross said.

He also reiterated his contention that the tariffs will not have harmful economic consequences.

Last week, Ross told CNBC the tariffs are “no big deal” and held up a can of soup to make his point that they will have a “trivial” impact on prices.

On Thursday, he said he used that soup prop to illustrate that the impact is “a fraction of a penny per can.”

“Please spare me the idea that this is going to be massively destructive to our economy,” he said. “All this talk about destruction in the other industries is simply not going to happen.”