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Trump Hails Revised Nafta Deal as a Trade Promise Kept Trump Hails Revised Nafta Deal, and Sets Up a Showdown With China
(about 9 hours later)
WASHINGTON — President Trump hailed a revised North American Free Trade Agreement as a victory for the United States, Canada and Mexico on Monday, saying his get-tough approach to trade, including his use of tariffs, was bringing results. WASHINGTON — President Trump said Monday that the revised North American Free Trade Agreement with Mexico and Canada would pour “cash and jobs” into the United States. But the deal’s importance may have less to do with the details than the signal it sends that Mr. Trump is methodically settling his multifront trade war to fight a single enemy: China.
“This landmark agreement will send cash and jobs pouring into the United States and into North America,” Mr. Trump said in remarks at the White House. “Good for Canada, good for Mexico.” A jubilant Mr. Trump celebrated the new Nafta agreement as the fulfillment of a bedrock campaign promise. He claimed it was a vindication of his aggressive use of tariffs and vowed to keep imposing them to extract deals from other trading partners, like the European Union and Japan.
Mr. Trump portrayed the new agreement as the fulfillment of a campaign promise to terminate Nafta, saying he had made good on his plan to rip up “the worst trade deal ever made” and help American businesses and workers. But while Mr. Trump expressed confidence about eventually reaching deals with Europe and Japan, he was far more grudging about China, saying it was too soon to begin talking. Administration officials say privately that Mr. Trump is content to leave tariffs on $250 billion of Chinese goods in place for the foreseeable future to weaken its hand.
“For 25 years as a civilian, as a businessman, I used to say: How could anybody sign a deal like Nafta?” Mr. Trump said, adding the deal reached on Sunday was “not Nafta redone, it’s a brand new deal.” “China wants to talk very badly,” Mr. Trump said at a news conference in the White House Rose Garden. “I said frankly it’s too early to talk, because they’re not ready.” He added, “If politically, people force it too quickly, you’re not going to make the right deal.”
The president attributed the breakthrough with Canada and Mexico to his use of tariffs and suggested that would continue to be part of his playbook as he tries to force concessions from other trading partners. The updated Nafta, which will be called the United States-Mexico-Canada Agreement, or U.S.M.C.A., represents Mr. Trump’s biggest trade achievement to date, and it comes after more than a year of intense negotiations that frequently fell into personal rancor between Mr. Trump and the leaders of Canada and Mexico.
“Without tariffs, we wouldn’t be talking about a deal,” Mr. Trump said. “Just for those babies out there that keep talking about tariffs.” After languishing for weeks, negotiations with Canada suddenly broke through Friday morning, according to a senior American official. The Trump administration, having received a detailed proposal from Canadian officials the day before, submitted a counteroffer, which the Canadians accepted in principle.
The updated Nafta, which will be called the United States-Mexico-Canada-Agreement or U.S.M.C.A., represents Mr. Trump’s biggest trade achievement to date and comes after more than a year of intense negotiations with Canada and Mexico. With a deal safely in hand, Mr. Trump lavished praise on Mexico’s outgoing president, Enrique Peña Nieto, with whom he had tangled repeatedly over the phone. He was less effusive about Prime Minister Justin Trudeau of Canada, but suggested their Cold War was over, too. It was not personal, Mr. Trump suggested about both men; it was just business.
But while the United States resolved its North American trade differences, it is still embroiled in disputes with China and the European Union and it is unclear whether Mr. Trump’s pugilistic approach will work with those trading partners. Robert E. Lighthizer, Mr. Trump’s top trade negotiator, said that the agreement reached on Sunday night would be a template for future deals, suggesting tariffs will remain part of Mr. Trump’s repertoire. “We had very strong tensions,” Mr. Trump said. “It was just an unfair deal, whether it was Mexico or Canada, and now it’s a fair deal for everybody. It’s a much different deal. It’s a brand-new deal. It’s not Nafta redone.”
The agreement came together on Sunday night after a weekend of frenzied negotiations between Canada and the United States, which culminated in keeping the three-country pact intact. Still, like some of Mr. Trump’s other accomplishments in business and government, the deal is partly a step forward and partly an exercise in rebranding.
Mr. Trump and Justin Trudeau, Canada’s prime minister, spoke about the agreement by telephone on Monday morning. After months of tension, they expressed hope that the deal would put their relationship on a stronger footing. Canada will ease longstanding protections on its dairy market and provide access greater than what the United States would have gained through the Trans-Pacific Partnership, a trade treaty negotiated by President Barack Obama, from which Mr. Trump withdrew last year.
“The prime minister and president stressed that the agreement would bring the countries closer together, create jobs and grow the middle class, enhance North American competitiveness, and provide stability, predictability, and prosperity to the region,” a spokesman for Mr. Trudeau said in a statement. The United States relented on its demand to eliminate an independent tariff dispute settlement system that Canada had said was a red line. Preserving it was a major concession for the United States, which had eliminated the mechanism, known as Chapter 19, as part of its deal with Mexico.
[Want more Canadian coverage in your inbox? Subscribe to our weekly Canada Letter newsletter.] The pact also makes a series of changes to areas like intellectual property and the digital economy, including protections for patents and domain names — all of which refresh Nafta, a 25-year-old pact that had become somewhat outmoded in the digital age.
Mr. Trump acknowledged the “difficulties” that he and Mr. Trudeau have had in recent months as a result of the trade dispute, but offered his “highest regard” for the prime minister. But many of these innovations were drawn from the Trans-Pacific Partnership, which included Canada and Mexico, and it prompted a senior Trump adviser to offer a rare endorsement of an Obama legacy achievement that Mr. Trump delighting in dismantling.
“We had very strong tensions,” Mr. Trump said, adding that they were alleviated on Sunday night when the agreement was reached. “We’re building on what was done in T.P.P.,” said Robert Lighthizer, the United States trade representative. “I’m in no way trying to knock the people that negotiated T.P.P.”
Mr. Trump also praised Enrique Peña Nieto, Mexico’s outgoing president with whom he has also clashed with in the past. But he added, “Because we had the benefit of that, our agreement is substantially better than T.P.P.”
“I think he’s a terrific person,” Mr. Trump said. Mr. Lighthizer pointed to changes in regulations governing automobile manufacturing, which he said would bring more car production back to the United States. Under the agreement, a greater percentage of vehicles would have to be made in North America to qualify for Nafta’s zero tariffs.
The agreement is largely a refresh of a 25-year-old pact that has brought together the economies of Canada, Mexico and the United States but had become somewhat outdated in the digital age. It makes a series of changes to areas like intellectual property and the digital economy, including protections for patents and domain names. A significant portion of the vehicles would also have to be assembled by workers earning at least $16 an hour — a wage floor intended to increase jobs in the United States and Canada, where wages are higher than in Mexico. While inflation will erode this wage protection over time, officials noted that the pact’s terms could be reviewed every six years.
As part of the deal, Canada will ease protections on its dairy market and provide access that is greater than what the United States would have gained through the Trans-Pacific Partnership, a trade treaty that Mr. Trump withdrew from last year. Analysts said the agreement might have an incremental impact on American automotive jobs, and might push car prices slightly higher. But Ford Motor Company said in a statement that it was “encouraged” by the accord, noting that a three-nation trade zone “will support an integrated, globally competitive automotive business in North America.”
The United States also relented on its demands to eliminate an independent tariff dispute settlement system that Canada has said is a red line in negotiations. Keeping that was a major concession for the United States and a change for what was agreed with Mexico. The United Steelworkers union urged caution, lamenting that the Trump administration’s steel and aluminum tariffs had not been lifted as part of the deal. The commerce secretary, Wilbur Ross, described those as “separate issues,” and Mexico and Canada say they expect those tariffs to be worked out on a separate track. Mr. Trump said the United States was talking with Mexico and Canada about potentially replacing them with quotas. Also unresolved is whether Canada and Mexico will continue retaliatory tariffs on American products like whiskey, orange juice and chocolate.
The countries also reached an understanding that would protect Canada from the automobile tariffs that Mr. Trump has routinely threatened. Mr. Trump must now submit the deal to Congress, where a potential change in control from Republicans to Democrats could throw its passage into doubt. Representative Nancy Pelosi of California, the House minority leader, made clear on Monday that Mr. Trump’s deal would not receive a rubber stamp.
The agreement builds upon the deal that was reached with Mexico in August. Most importantly it made alterations to rules governing automobile manufacturing, in an effort to bring more car production back to the United States from Mexico. As part of the agreement, a significant portion of vehicles would have to be made by workers earning at least $16 an hour. The wage floor is intended to boost jobs in the United States and Canada, where wages are already higher than Mexico. But the top Senate Democrat, Chuck Schumer of New York, offered a rare endorsement of Mr. Trump’s approach.
In a statement, Ford Motor said it was “encouraged” by the accord, adding that a three-nation trade zone “will support an integrated, globally competitive automotive business in North America” and help keep and add manufacturing jobs. “As someone who voted against Nafta and opposed it for many years, I knew it needed fixing. The president deserves praise for taking large steps to improve it,” Mr. Schumer said in a statement. He cautioned, though, that “any final agreement must be judged on how it benefits and protects middle-class families and the working people in our country.”
Ford, General Motors, Fiat Chrysler, Toyota and Honda all have Canadian plants that ship cars to the United States. Experts on trade delivered a mixed verdict on the agreement. Parts of it, they said, were a much-needed update to Nafta. But other parts could restrict trade in a way that would ultimately hurt American consumers and increase uncertainty for American companies.
Analysts said the agreement might have an incremental impact on American automotive jobs, and may push car prices slightly higher. “The new regional value content requirements mean that automakers will not able to source parts as freely, so there will be added costs associated with vehicle manufacturing,” said Ivan Drury, senior manager of industry analysis at Edmunds, another auto-data provider. “He started this conflagration with Mexico and Canada, as he has with other trading partners,” said Daniel M. Price, a former trade adviser to President George W. Bush. “That he may put out the fires after they have destroyed significant acreage does not vindicate either the strategy or the result.”
The requirement for 75 percent North American content will likely require relatively small adjustments for the three Detroit automakers. Many of their top-selling models — including the Jeep Grand Cherokee, Ford Expedition and F-150, the Chevrolet Silverado — exceed that level already. Some models that don’t are being discontinued, such as the Ford Focus and Taurus. The White House is moving on several fronts to settle the trade disputes Mr. Trump started. Last week, Mr. Trump signed a revised trade agreement with President Moon Jae-in of South Korea. He and Prime Minister Shinzo Abe of Japan agreed to begin talks on a deal, after months of resistance by Tokyo.
Determining whether companies comply with the wage requirement will be more complicated because one vehicle can have parts made by dozens of different companies all paying different wages. In general, a large majority of American and Canadian auto-assembly workers earn more than $16 an hour. Suppliers, especially those located in southern states, often pay somewhat less. “They finally got their act together and decided they can’t win all these wars, so they’re settling many of them and focusing on China,” said Gary Clyde Hufbauer, a senior fellow and trade expert at the Peterson Institute for International Economics. “They’re lining up the ducks for this gigantic battle with China.”
The Alliance of Automobile Manufacturers, the industry’s main lobbying group, said it still has to review the text of the proposed agreement, which has more than 1,000 pages. But the inclusion of Canada was a major step forward. “We have said all along that it is key that the United States, Mexico and Canada maintain this agreement as a trilateral pact,” the organization said. There are no plans for trade negotiations between China and the United States, although the president’s chief economic adviser, Larry Kudlow, said Mr. Trump might meet President Xi Jinping of China at a summit meeting in Argentina in late November.
Markets were pleased to have averted the uncertainty of trade dispute in North America. Stocks rose in early trading in the United States, and the Canadian dollar and the Mexican peso both climbed. On Monday, Mr. Trump raised the prospect of even more tariffs against China and said his actions were taking a toll on the Chinese economy.
But as lawmakers, trade analysts and industry groups studied the new text, some suggested that it was too soon to celebrate. Although he voiced hopes about a deal with the European Union — and praised Jean-Claude Juncker, the European Commission president with whom he agreed to hold off on auto tariffs — White House officials said the negotiations with Europe would be arduous.
The United Steelworkers union urged caution on Monday, lamenting that the Trump administration’s steel and aluminum tariffs had not been lifted as part of the deal. Mexico and Canada say they expect those tariffs to be worked out on a separate track. Also unresolved is whether Canada and Mexico will continue to impose the retaliatory tariffs they placed on American products like whiskey, orange juice and chocolate. Jared Kushner, the president’s senior adviser and son-in-law, played a significant role in smoothing over the final sticking points between the United States and Canada, according to officials. He met informally with the Canadian foreign minister, Chrystia Freeland, during the transition, and kept in touch with her, even as Mr. Trump’s relationship with Mr. Trudeau became fraught.
“The key question now is whether this new agreement, when final, will make a measurable difference in workers’ lives and whether workers will have confidence in the new provisions and the commitment of government to enforce those provisions,” said Leo W. Gerard, president of the union. “The relationship that we’ve been able to build with the countries established a lot of trust, both with the Canadians and Mexicans,” Mr. Kushner told reporters. “It was through that trust that we were able to talk about a lot of these issues.”
Wilbur Ross, the Commerce secretary, defended the decision to maintain the metal tariffs. Mr. Trump and Mr. Trudeau spoke by telephone Monday morning, though Mr. Trudeau later dodged questions about whether the agreement would restore his relationship with the president.
“Yes, those are separate issues from this,” Mr. Ross said on the Fox Business Network. “There are problems specific to steel and aluminum relating to our national defense. And at this point in time, those stay the same.” “The relationship between the U.S. and Canadians is much deeper than just the relationship between two individuals who happen to be prime minister and president,” Mr. Trudeau said.
In a news conference, Mr. Trump said that the United States is talking with Mexico and Canada about a separate arrangement to lift the steel and aluminum tariffs and potentially replace them with quotas. At the White House on Monday, Mr. Trump exulted in the abbreviation for the new agreement, U.S.M.C.A., which he predicted that “99 percent of the time we’ll be hearing.”
The new agreement could also face political obstacles, as Congress is responsible for granting final approval of trade agreements. If Democrats take control of the House next year, it is possible that they will call for changes or prevent the administration’s agreement from taking effect. That rebranding, however, may prove to be one of Mr. Trump’s biggest challenges. Even in his briefing with reporters afterward, Mr. Lighthizer, a veteran trade lawyer, referred to the deal as Nafta.
Representative Nancy Pelosi of California, the House minority leader, made clear on Monday that Mr. Trump’s deal would not receive a rubber stamp.
“Democrats will closely scrutinize the text of the Trump administration’s Nafta proposal, and look forward to further analyses and conversations with stakeholders,” Ms. Pelosi said.
Despite his optimism about the deal, Mr. Trump acknowledged that passage in Congress could be a problem.
“I’m not at all confident,” Mr. Trump said, referring to Democrats. “They might be wiling to throw away one the great deals for people and the workers for political purposes.”