Trump Softens NAFTA Stance

In a phone call with leaders of Mexico and Canada, President Trump indicated Wednesday he would not immediately abandon the North American Free Trade Agreement (NAFTA).

Trump said he would instead quickly begin the process of renegotiating the deal. This news comes directly after other administration officials said Trump would likely sign an order to take the United States out NAFTA.

The White House said the evening calls with President Enrique Peña Nieto of Mexico and Prime Minister Justin Trudeau of Canada were “pleasant and productive.”

“It is my privilege to bring NAFTA up-to-date through renegotiation,” Mr. Trump said in a statement issued late Wednesday evening. “I believe that the end result will make all three countries stronger and better.”

The news shows White House negotiation tactics in real time. Trump had sharp campaign rhetoric against NAFTA, once calling it the worst trade deal ever signed by the United States. Last week he called it a “very, very bad” deal for American companies and workers. On Tuesday, the White House announced plans to impose a tariff on Canadian softwood lumber, due to what it called unfair treatment of American dairy farmers.

The market reacted negatively when the news broke midday Wednesday that Trump planned to withdraw from NAFTA, and Canadian Prime Minister Trudeau called Trump twice this week to discuss trade relations between the U.S. and Canada.  The peso fell more than 2 percent against the dollar Wednesday, and the Canadian dollar fell about 0.3 percent.

Washington must give Canada and Mexico six months’ notice before exiting the trade agreement.

If the United States were to actually abandon the agreement, experts quoted in the New York Times speculated that  the U.S. would probably enter into an agreement with Canada similar to the one that existed between the two countries in the late 1980s. Trade with Mexico, on the other hand, could change significantly, as Mexico could react by imposing much higher tariffs on American products like corn, possibly causing significant disruptions.