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Trump's NAFTA replacement, USMCA Deal 'In Trouble', Bruised by Elections, Tariff Rows

More than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding.

The three countries struck the United States-Mexico-Canada agreement (USMCA) on Sept. 30, ending a year of difficult negotiations after U.S. President Donald Trump demanded the preceding trade pact be renegotiated or scrapped. The United States has its next presidential contest in 2020, and Canada holds a federal election in October.

“The USMCA is in trouble,” said Andres Rozental, a former Mexican deputy foreign minister for North America.

Canada’s Parliament must also ratify the treaty and officials say the timetable is very tight. Current legislators only have a few weeks work left before the start of the summer recess in June, and members of the new Parliament would have little chance to address ratification until 2020.

Trump, a Republican, has shown frustration with the Democratic-led U.S. House of Representatives for failing to sign off on the USMCA. He has threatened to pull out of the old pact, the North American Free Trade Agreement (NAFTA), if Congress does not hurry up.

Trump on Thursday threatened to slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration.

In Ottawa, Canadian Foreign Minister Chrystia Freeland said this week her government was “constantly” looking at its own retaliation list, noting that Trump’s tariffs left the country over C$16 billion worth of space to strike back.

Prime Minister Justin Trudeau, who faces a tough re-election battle, on Thursday rejected accepting quotas on Canadian steel and aluminum in exchange for U.S. tariffs being dropped.

Trudeau was criticized during the USMCA negotiations for giving ground to Trump on access to Canada’s dairy sector.

USMCA Little Different From NAFTA

An amazing amount of bickering is taking place over what is essentially the same deal. Canada is correct to be annoyed over Trump's tactics.

Mexico no doubt will not be happy with Trump's threats on auto parts. The US auto makers will not be pleased either.

Trump Backs Off Closure Threat

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Trump Backs Down As Expected

Trump backed down from threats to close the border with Mexico as expected in this corner. We would have had chaos over auto parts, medical supplies, and food had he not done so.

Yet, Trump again threatens slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration. He won't, else he risks USMCA.

China Trade Deal

The trade deal with China keeps getting extended and extended. I expect a signing, but as with USMCA there won't be much in it.

Art of the Fail

In January of 2018, Democrats offered Trump $20 billion to build a wall in return for and amnesty deal. It would have solved two issues. Trump turned down that offer which he would gladly take today.

Trump promised a better NAFTA. Instead we are bickering over what is essentially the same deal. In one aspect USMCA is worse than NAFTA because it puts US companies at the mercy of a corrupt Mexican court system.

Eventually I expect USMCA and a trade deal with China to pass, but the former is essentially the same and the latter will just return to China to buying more soybeans and Boeing aircraft.

Unmaking of a Pretend Deal Maker

At this point, the whole world knows Trump is an awful negotiator. Even worse, he negotiates in a predictable pattern: scream, bluff and ask for the moon, then cave and plead for a deal at any price.

The press and the Democrats are so busy speculating on the latest legal actions and Russia nonsense that they ignore this far bigger story story sitting right in front of them.

Mike "Mish" Shedlock