Experts Question Trump's Strategy To Reach Revised NAFTA Deal

Oct 4, 2018
Originally published on October 4, 2018 10:46 am
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President Trump celebrated a partial cease-fire this week in his ongoing trade war when Canada joined Mexico in agreeing to new trade terms with the U.S. The Trump administration called this a vindication of Trump's hard-edged negotiating style. But some analysts are questioning the cost of the president's strategy, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Trade analysts are still digesting the updated version of NAFTA that President Trump unveiled this week, including its brand new name.

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PRESIDENT DONALD TRUMP: USMCA - and that'll be the name, I guess, that, 99 percent of the time, we'll be hearing - USMCA.

HORSLEY: Trump, who coined the moniker, says it has a nice ring to it. But Chad Bown of the pro-trade Peterson Institute for International Economics is not sold.

CHAD BOWN: (Laughter) No. It sort of has too many letters to be nice and simple, and yet, not enough vowels to make it into a word.

HORSLEY: Even the president's economic adviser, Larry Kudlow, needs some practice.

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LARRY KUDLOW: USA - have to get this right - USAMC - right.

HORSLEY: Wrong. But whatever you call it, Kudlow says the agreement helps to preserve North America's status as a continent-wide free trade zone.

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KUDLOW: Supply chains will be there. Business will not be disrupted. All those threats have not come to pass. So I think it's a good deal. I think the president deserves some credit.

SCOTT LINCICOME: (Laughter) Right.

HORSLEY: Scott Lincicome is a trade lawyer and a scholar at the libertarian Cato Institute.

LINCICOME: That strikes me as the arsonist taking credit for not burning down your house.

HORSLEY: Lincicome notes the only reason supply chains were in doubt was Trump's own threat to scrap NAFTA. The new trade deal puts an end to that uncertainty and provides some useful updates covering digital commerce, for example, that didn't exist when NAFTA was signed a quarter-century ago.

But most of those updates were already included in the Trans-Pacific trade pact, or TPP, a draft agreement that Trump pulled the plug on. Had that deal taken effect, it would've included not only Mexico and Canada, but nine other countries as well.

Phil Levy of the Chicago Council on Global Affairs says that's an important yardstick by which to measure the president's new deal.

PHIL LEVY: It is definitely better than an all-out trade war. I think it's notably less good than we would've been with the TPP. Even if this deal passes, and I don't think that's a sure thing, trade is going to be less free in North America than it was when President Trump took office.

HORSLEY: The new agreement requires automakers to use more North American content if they want to sell cars here duty-free. And it includes a minimum wage provision that could shift some auto production from Mexico to the United States.

Levy, who was a top trade economist in the George W. Bush White House, notes the deal also leaves intact stiff tariffs on Canadian and Mexican steel and aluminum.

LEVY: The president is not coy about how much he enjoys tariffs.

HORSLEY: That raises prices for American consumers, and other countries' retaliatory tariffs hurt U.S. exporters. Wisconsin cheesemakers, for example, now face tariffs of up to 25 percent when they try to sell their cheese in Mexico. That's likely to offset any additional sales they might gain in Canada through the increased market access that Trump's team negotiated.

The administration has also opened trade talks with the European Union and Japan. White House adviser Kudlow says progress there could pave the way for a coordinated crackdown on bad behavior by China.

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KUDLOW: There is a trade coalition of the willing that is beginning to fix a lot of broken areas in our international trading system. And that coalition will stand up to China.

HORSLEY: Maybe so. But the Peterson Institute's Bown says the administration now has to reassemble a coalition that was already inclined to side with the U.S. before Trump started targeting friends with tariffs.

BOWN: There's a lot of healing that needs to take place, I think, between the United States and a lot of allies before effective action toward China is going to transpire.

HORSLEY: Trump has already ordered tariffs on about half the products the U.S. imports from China, and more could be on the way. Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.