Vice President Mike Pence and Canadian Prime Minister Justin Trudeau met in Ottawa on Thursday to promote the revised NAFTA deal, now known as the United States-Mexico-Canada Agreement, or USMCA.
But as Pence was extolling the trade deal in Canada, the Trump administration followed up by potentially undermining the very trade pact that it renegotiated.
Trump riled House Democrats by notifying Congress on Thursday that he wants to move forward with the USMCA approval process, even though Democrats still object to some of the USMCA’s provisions. And, most critically, Trump announced new tariffs on Mexico on Thursday night in an attempt to force the country to crack down on migration — something that’s gotten bipartisan pushback.
Both of these moves threaten the USMCA here in the US and in Mexico. Canada, at least for now, is largely outside the drama. It implemented its legislation to ratify the USMCA this week, with the goal of approving it next month.
The thing with a trilateral trade pact is that you need all three countries on board for it to go in effect. Two weeks ago, Trump struck a deal to lift steel and aluminum tariffs on Mexico and Canada, which seemed to clear the way for the USMCA approval.
But the White House’s latest moves have now thrown that into question.
Trump’s notification to Congress, briefly explained
Trump signed the USMCA — along with Trudeau and then-Mexican President Enrique Peña Nieto — in November. But legislatures in all three countries still need to approve this updated version of the North American Free Trade Agreement.
Trump’s steel and aluminum tariffs on Canada and Mexico represented a huge hurdle to the deal ever getting passed, as both Canada and Mexico, as well as members of Congress (including Republicans), wanted those tariffs lifted before they would even entertain the idea of passing the USMCA. And in May, the White House struck a deal to get rid of the tariffs, an announcement that renewed optimism in the deal’s future.
But that might have been premature. Beyond the tariffs, House Speaker Nancy Pelosi and other House Democrats have also made clear that they want stronger enforcement of labor provisions in the USMCA, along with some beefing up of environmental protections and drug provisions. Though Mexico passed new labor laws last month that will help it comply with the new standards in the USMCA, Democrats and labor unions in the US still had some issues.
The Trump administration’s top trade official, Robert Lighthizer, has upped his outreach with Democrats on Capitol Hill in recent weeks. And both sides seemed hopeful that the administration and House Democrats could reach some sort of resolution to get the USMCA through Congress with bipartisan support.
But on Thursday, Trump essentially told House Democrats that he wants to move ahead, against their objections. The White House submitted what’s called a draft statement of administrative action, which is basically a notice that it plans to submit the USMCA legislation after 30 days. It can be longer than 30 days (not shorter), but the message is pretty much the same: no more delays.
The White House and Democrats can keep talking during this period — and Lighthizer said he would continue to work with Democrats.
But it’s definitely putting pressure on House Democrats. The president clearly wants USMCA passed before the fall, and definitely before the 2020 campaign gets fully underway. Trump would really like to list renegotiating the “worst trade deal in history” as one of his accomplishments. If he can’t do that, though, then the next best thing might be to blame the Democrats for obstructing his new trade deal.
“If you kind of throw this bomb in their court, then for at least a significant portion of his base, they’ll be willing to except his interpretation of this — as Democrats causing problems rather than the Trump administration causing problems,” Todd Tucker, a trade expert at the Roosevelt Institute, a liberal think tank, told me.
But Pelosi is in no such rush, and while she’s indicated she could get to “yes” on NAFTA, she said she wants to more closely examine the enforcement mechanisms. And Pelosi wasn’t amused by the White House’s decision to submit that notice to Congress, though, and had warned Lighthizer against talking this step, according to the Washington Post.
“The Trump Administration’s decision to send Congress a draft statement of administrative action before we have finished working with U.S. Trade Representative Lighthizer to ensure the USMCA benefits American workers and farmers is not a positive step,” Pelosi said in a statement. “It indicates a lack of knowledge on the part of the Administration on the policy and process to pass a trade agreement.”
Pelosi does have leverage on whether or not to bring the USMCA legislation to the floor — and she’s used it to sidetrack trade deals in the past, including in 2008 with George W. Bush’s trade pact with Colombia.
And if Democrats were already reluctant about the USMCA, a revived trade war with Mexico isn’t exactly going to help things. And it might alienate some Republicans, too.
Oh, and then there’s these new tariffs on Mexico
Trump tweeted Thursday night that, starting in two weeks, the US plans to impose 5 percent tariffs on all goods coming “into our Country from Mexico” until Mexico basically solves a migration problem that neither country has ever been able to solve. Those tariffs will gradually increase the longer Mexico fails to curb migration.
On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..
— Donald J. Trump (@realDonaldTrump) May 30, 2019
Trump’s use of tariffs as a pressure tactic isn’t exactly shocking. But that he chose to take this step while trying to get the USMCA passed is somewhat strange. And it’s not just the potential opposition from Mexico that’s the problem: Neither Republicans nor Democrats in Congress are enthusiastic about the move.
Republicans and business groups have already pushed back, saying the tariffs are endangering the USMCA.
“Trade policy and border security are separate issues,” Sen. Chuck Grassley (R-IO), who leads the Senate Finance Committee that will handle USMCA, said, according to Politico. “This is a misuse of presidential tariff authority and counter to congressional intent. Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country.”
Or as innerdaily’s Matt Yglesias put it, “Creating a huge trade policy blowup with Mexico is not a great way of convincing Congress to move forward with USMCA and could scuttle things in the Mexican Congress as well.”
The administration has insisted that the two issues are unrelated. Acting White House Chief of Staff Mick Mulvaney said on a call Thursday that “these are not tariffs as part of a trade dispute, these are tariffs as part of an immigration matter, the USMCA is entirely separate.”
But eliminating tariffs and other trade barriers is supposed to be one of the perks of trade agreements, and if Trump keeps going around that by invoking national security concerns, the US becomes a far less attractive trading partner to Mexico, Canada, and just about everyone else.
Mexico introduced legislation this week to ratify the USMCA, and, as mentioned, has already passed laws to bring it into compliance with the deal’s new labor provisions.
Mexico has the most to lose if the the USMCA falls apart. At the same time, Trump is not popular among Mexicans — for reasons that should be pretty apparent — and these new tariffs will make it all the more politically complicated to pass the USMCA. This puts Mexico’s president, Andrés Manuel López Obrador (or AMLO for short), in a bit of a tight spot.
AMLO is pushing back, and likely trying to persuade Trump not to make good on his threat. The Mexican president sent a letter to Trump on Friday where he basically said Mexico is trying to curb migration, but it’s not going to respond to threats. “Please, remember that I do not lack valor, that I am not a coward nor timorous but rather act according to principles,” AMLO wrote, according to the Associated Press.
As Tucker, the trade expert at the Roosevelt Institute, points out, Trump can also blame Mexico for obstructing USMCA if it balks over tariffs. But that’s a much harder case to make when Trump is also isolating Congress. Trump was already having a hard enough time with Democrats, but now he’s got Republicans to deal with, too.
“I think the fact that he made the threat makes it hard to land this, ever,” Tucker said. It was always going to be difficult, especially with Democrats in control of the House. “Now, it just makes it virtually impossible. I don’t see how you have a successful conclusion of [the USMCA] after this.”