Trump's new threat to NAFTA partners: Give better deal or face steel tariffs

President Trump listens during a meeting with steel and aluminum executives in the Cabinet Room of the White House on March 1.

By Don Lee and Patrick J. McDonnell

March 5, 2018 4:40 PM PT

Reporting from Washington — President Trump threw a wrench Monday into long-stalled regional trade talks, saying that Mexico and Canada could avoid planned new tariffs on aluminum and steel if they agreed to make concessions to Washington in negotiations over the North American Free Trade Agreement.

Trump has frequently threatened to withdraw from NAFTA if its two pact partners don’t accede to U.S. demands for a more favorable deal.

But on Monday, the president suggested that Canada and Mexico could avoid the tariffs if they made concessions in negotiations to rewrite the almost quarter-century-old agreement. The three sides wrapped up the seventh round of talks in Mexico City on Monday with little progress on the key sticking points.

“Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed,” Trump tweeted. “Also, Canada must treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.”

Progress in the NAFTA talks has been plodding, negotiators concede, and U.S. Trade Representative Robert Lighthizer warned that time for a deal was waning as elections approach in the three nations.

“Now our time is running very short,” Lighthizer told reporters Monday at the conclusion of the latest round of talks in Mexico City. “The longer we proceed, the more political headwinds we will feel.”

Seven months of negotiations have resulted in the closing out of just six of the accord’s 30 chapters, officials said, and many of the thorniest trade issues remain on the table.

If an agreement proved impossible, Lighthizer warned, Washington was “prepared to move on a bilateral basis” on trade pacts.

“We are at the point where we have very important political decisions to be made,” the U.S. trade representative said.

Trump’s comments linking the new proposed tariffs to progress on the NAFTA talks threw a fresh factor into the complex, three-nation negotiations. Mexican and Canadian commentators generally viewed Trump’s announcement as a gambit to gain favorable terms for the United States in a reshaped trade deal.

Trump said on Thursday, that he would levy tariffs of 25% on imported steel and 10% on aluminum, but he provided few details during what appeared to be off-the-cuff remarks in response to a reporter’s question near the close of a meeting in the White House with steel and aluminum manufacturing executives.

The president’s announcement surprised much of his own staff and drew immediate fire from Canada and other governments, as well as Republican lawmakers and businesses that use the metals. A formal announcement on the duties was promised for this week.

On Monday, Canada’s foreign minister, Chrystia Freeland, reiterated her government’s opposition to the tariffs and warned that Canada would respond forcefully to such an action. Canada is the No. 1 exporter of steel and aluminum to the United States, and Mexico ranks among the top five. Canada and Mexico are also the top two buyers of American-produced aluminum and steel.

“Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” Freeland said in Mexico City, where she appeared at the conclusion of the latest round of NAFTA talks. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take appropriate responsive measures to defend our trade interests and workers.”

House Speaker Paul D. Ryan (R-Wis.) publicly broke with Trump, fearing the proposed tariffs could set off a trade war.

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” said AshLee Strong, Ryan’s spokeswoman. “The new tax reform law has boosted the economy and we certainly don’t want to jeopardize those gains.”

Trump has responded by brushing aside criticisms of a potential trade war, and on Monday seemed only to stiffen his resolve on the metals tariffs.

“No, we’re not backing down,” Trump said in answering a reporter’s question about tariffs. “We had a very bad deal with Mexico, we had a very bad deal with NAFTA.”

“Right now, 100%, but it could be a part of NAFTA,” he said, opening the door to the possibility that Canada and Mexico could be exempted from the tariffs.

Trump said the United States had been “ripped off” by other countries on trade. “We lost $800 billion on trade. … We are going to take care of it.”

Over the weekend, the president’s trade advisor, Peter Navarro, who has been the administration’s spokesman on the tariffs, told Fox News that Trump’s announcement was for across-the-board duties. “That’s the direction it’s heading,” he said. And Navarro said on CBS News that “we expect probably by the end of the week that these will be signed,” after they have been reviewed by legal staff.

The administration is justifying the tariffs on the grounds that a surge of imported steel and aluminum presents a threat to the country’s national security.

Trump has made revamping America’s trade policies a key part of his economic platform, and administration officials have been in talks with their Canadian and Mexican counterparts to revise NAFTA since August in an attempt to reverse merchandise trade deficits with both countries. The three parties have made some progress, although several major issues remain unresolved, including controversial rules on automobile content, government procurement and conflict resolution.

In linking the proposed metals tariffs with NAFTA, Trump apparently meant to apply pressure on negotiators, but analysts said the tactic was likely to be counterproductive.

“It’s another attempt to bully,” said William Reinsch, a veteran trade expert and senior advisor at the Center for Strategic and International Studies in Washington.

“They won’t buy it and it doesn’t make any sense,” he added. “It’s two separate things. There’s no conjunction in timing.”

The metals tariffs may be imposed this week or next, the White House has indicated, but Reinsch and other analysts expect the NAFTA renegotiations to drag on for some months. Moreover, the talks could get held up for political reasons as the Mexican presidential election approaches this summer, and then the midterm elections in the United States.

Ildefonso Guajardo, Mexico’s economic secretary and its chief NAFTA negotiator, responded to Trump’s latest pressure with a measured tweet of his own:

“Mexico shouldn’t be included in steel & aluminum tariffs. It’s the wrong way to incentivize the creation of a new & modern NAFTA,” he said.

Responding to Trump’s Twitter declaration that Mexico must “do much more” to stop illicit drugs from entering the United States, Mexico’s foreign minister, Luis Videgaray, said that drug smuggling was a “shared responsibility” between the two nations.

“This accepted principle guides our cooperation with U.S. agencies,” Mexico’s top diplomat tweeted. “Only working together and addressing supply and demand we can stop the illegal flow of drugs, cash and weapons going both ways.”

To read this article in Spanish click here

Lee reported from Washington and McDonnell from Mexico City. Cecilia Sanchez of the Times’ Mexico City bureau contributed to this report.

UPDATES:

4:40 p.m.: This article was updated with information from a news conference in Mexico and with additional background.

12:20 p.m.: This article was updated with a comment from House Speaker Paul D. Ryan (R-Wis.).

9:40 a.m.: This article was updated with Times staff reporting.

This article was originally published at 8:15 a.m.