President Trump dealt another blow to key trade renegotiation talks this week after first announcing tariffs on steel and aluminum imports before following those threats with a series of tweets praising “trade wars” and calling for “reciprocal taxes” as a means of combating U.S. trade deficits.
On Friday morning, Trump penned several tweets lashing out at other countries and lamenting the state of U.S. trade and related taxation.
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump wrote. “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”
That tweet was followed by another, emphasizing the importance of steel, and then a third tweet centered on trade.
“When a country Taxes our products coming in at, say, 50%, and we Tax the same product coming into our country at ZERO, not fair or smart. We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” Trump tweeted.
It is unclear from Trump’s tweets whether the president is calling for reciprocal taxes or reciprocal tariffs — one would mean the duty placed on U.S. goods by other countries would merit a tit-for-tat percentage. The other would seemingly mean a tit-for-tat sales tax scenario. The threats follow a much-teased announcement on Thursday, when Trump declared his intentions to slap tariffs of 25 percent and 10 percent on steel imports and aluminum, respectively.
Trump failed to go into specifics — or indicate which countries might be exempt from the plan — but the announcement only served to exacerbate tensions as North American Free Trade Agreement (NAFTA) talks move into their seventh round. There’s a major reason for that: The United States imports the majority of its steel from Canada; Mexico serves as the fourth-biggest provider.
Canadian officials quickly made it clear that Trump’s tariff announcement could blow up NAFTA.
“It is entirely inappropriate to view any trade with Canada as a national security threat to the United States,” said Canadian Foreign Minister Chrystia Freeland, Canada’s leading NAFTA negotiator, in a statement addressing Trump’s threats released on Thursday. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”
Freeland’s comments marked Canada’s most aggressive response to U.S. trade threats yet and led multiple industry groups to speculate a trade war might ensue. That discussion seems in turn to have sparked Trump’s Friday tweets embracing the idea as “good” for the United States. While steel and aluminum trade only relies in part on NAFTA, even groups supporting Trump’s tariff push — like the United Steelworkers union — feel Canada should be exempt.
“These tariffs are yet another example of the highly protectionist America First agenda playing out in real time,” Adam Taylor, a former Canadian trade official now with Export Action Global, told Bloomberg. “That they come right in the middle of NAFTA negotiations is worrisome as Mexico and Canada see modernizing as enhancing and upgrading NAFTA while the U.S. views the NAFTA 2.0 talks as a way to erect new barriers.”
The heated back-and-forth is in keeping with the broader tenor of the negotiations so far. NAFTA talks have been going poorly since they began, thanks in large part to strident U.S. demands and a seeming unwillingness to compromise with the needs of Canada and Mexico. Trump has labeled NAFTA the “worst trade deal ever made” and threatened repeatedly to tear up the agreement if renegotiation efforts are unsuccessful.
That hasn’t gone over very well with the other parties involved — while talks were initially set to end this month, they may now stretch into next year. The ongoing seventh round of talks, meanwhile, wasn’t going well even prior to Trump’s announcement on Thursday and additional comments on Friday.
Now, they’re set to worsen, alarming Mexico as much as Canada. During an event at the National Immigration Forum on Thursday night in Washington, D.C., Mexico’s ambassador to the United States, Gerónimo Gutiérrez, emphasized NAFTA’s importance for U.S.-Mexico relations.
“We did NAFTA 25 years ago because we wanted to trade more among ourselves. Our trade has multiplied six-fold…Mexico is now the United States’ second destination for exports,” Gutiérrez said.
“Over 30 states in the United States [have] Mexico as their first or second trading partner. [Numbers point] to the fact that around 5 million jobs depend directly on trade with Mexico. Mexico’s investment in the United States is $52 billion,” he continued. “That investment is creating jobs in Ohio, Texas, California, and many other places. NAFTA is not so much anymore about how we trade among ourselves, which is important, but how we produce better together to export to other regions in the world, to supply chains that have been formed over the last 25 years.”
Gutiérrez’s comments point to a larger issue: U.S. threats aren’t going over well in Mexico. Data from Mexico’s Agrifood and Fishery Information Service (SIAP) already indicates the country is shifting away from the United States as a trading partner and towards countries like Brazil. That’s costing U.S. farmers, many of whom have already begun to express concern about the implications of any failure to renegotiate NAFTA.
Tensions with Canada and Mexico over imports have baffled experts — largely because they are viewed as unnecessary. Many economists argue that U.S. deficits, long a source of ire for Trump, are not actually a bad thing. That hasn’t stopped the White House from honing in on the issue, something made clear by Trump’s tweets. On Thursday, the president also argued the tariffs were important for U.S. national security. But that’s a dubious claim, per the New York Times’ Neil Irwin, as is the suggestion that trade wars have a positive impact on the economy.
If anything, the tariffs are likely to ultimately impact U.S. consumers and companies. A full-out trade war, meanwhile, would almost certainly harm U.S. relations with other countries — not least of all Canada and Mexico. Even within the White House those efforts are unpopular with several key strategists: Trump’s chief economic policy advisor, Gary Cohn, was reportedly eyeing a White House exit but stayed to lobby against the tariff proposal, a battle he appears to have lost.
Current NAFTA talks are set to end March 5 in order to allow for the Mexican presidential campaign to proceed on March 30. Unless the White House reverses course, the new U.S. tariffs are set to go into effect next week.
With additional reporting by Esther Yu Hsi Lee.