(June 11): US President Donald Trump said he would not reauthorise the US’ trade deal with Canada and Mexico, setting the stage for months or years of negotiations over provisions governing automobiles and other key industries.
The countries are facing a July 1 milestone to extend the pact, which Trump negotiated during his first term, as is for 16 years. Such an extension wasn’t expected, with the US president escalating trade tensions with the nation’s neighbours since returning to office. Without an extension, the deal will enter rolling annual reviews but remain in force for up to a decade, barring one country exiting it entirely.
“I am not looking to renew it,” Trump told reporters on Wednesday at the White House. “Because to be honest with you, the US does much better. We don’t need anything that Canada has, we don’t need anything that Mexico has, but they need everything that we have, and they have to treat us better.”
The Mexican and Canadian governments did not immediately reply to a request for comments. The next round of US-Mexico talks is set for this month, followed by a third in July. The US and Canada have not yet launched formal negotiations.
Mexico and Canada are two of the largest US trading partners, doing nearly US$2 trillion ($2.57 trillion) in annual trade with each other. Goods that are compliant with the agreement have largely been exempt from Trump’s barrage of tariffs, helping keep prices lower for US consumers.
Trump did not say whether he was considering fully exiting the deal, which any party can do with six months’ notice.
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Trump has been pressing to change the pact and reshore key industries such as auto manufacturing, but the scope of his ambitions is not clear. The Office of the US Trade Representative has consistently declined to specify whether the US is willing to reopen the text of the agreement, which would almost surely require a vote in Congress.
Instead, talks have focused on bilateral side-deals that are poised to centre on whether the countries can strike agreements where Canada and Mexico offer concessions in exchange for tariff relief, particularly over Trump’s so-called Section 232 tariffs on automobiles and steel.
Mexico has argued that the current tariff regime leaves its auto sector at a disadvantage compared to countries such as Japan and Korea, which struck top-line trade pacts with the US to slash their auto tariffs to 15%.
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Trump has privately mused about whether he should exit the pact, but has not yet publicly threatened to do so in his second term. He regularly made such threats during negotiations in his first term.
The administration has also given preferential treatment to the trade agreement, exempting most US-Mexico-Canada Agreement-compliant goods from Trump’s across-the-board tariffs, but undercutting the agreement by applying sectoral levies, such as on vehicles, a key industry upon which the trade deal was designed.
Mexican and Canadian auto exports to the US currently face a 25% tariff on non-US portions of the vehicle. Auto parts exports are not facing that levy, but the US has threatened to apply a similar one.
Uploaded by Tham Yek Lee
