Trump May Threaten a Trade War Over NAFTA, but His Options Are Limited

Trump May Threaten a Trade War Over NAFTA, but His Options Are Limited
A worker loads rolls of sheet metal at LMS International, a distribution company in Laredo, Texas, Nov. 21, 2016 (AP photo by Eric Gay).

When then-President Bill Clinton signed the North American Free Trade Agreement in a White House ceremony in December 1993, he called it “a defining moment” for the United States and praised Mexico and Canada as “our partners in the future that we are trying to make together.” All three countries had made what then seemed like an irreversible decision to marry their economic futures. Yet today, less than a quarter-century later, those bonds are badly fraying.

The new U.S. president, Donald Trump, wants to renegotiate NAFTA, which he has called “the worst trade deal in history.” Mexican President Enrique Pena Nieto has seen his approval rating fall to a paltry 12 percent as Trump has pressured American companies to stop investing in Mexico. Canadian Prime Minister Justin Trudeau, who visited the White House this week, is trying to sidestep Mexico and curry favor with Trump by talking up the balanced trading relationship between his country and the United States. The “three amigos” of North America have each retreated to their own corners, eyeing each other suspiciously.

Their suspicions run deep because neither Mexico nor Canada knows quite what the new American president intends to do next. During the transition and into the early weeks of his presidency, Trump and his advisers issued all sorts of threats, from hefty across-the-board tariffs on Mexican imports to targeted border taxes aimed at American companies that build factories in Mexico and sell back into the United States. Those early flourishes, coupled with Trump’s repeated threats to force Mexico to pay for the new border wall he promised in his campaign, led Pena Nieto to cancel a planned visit to Washington last month.

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