NAFTA Uncertainty Continues in the Wake of Cross-Border Trade Dispute

written on behalf of Feigenbaum Law

Despite President Trump indicating his intention not to sign a renegotiated NAFTA deal until after the U.S. midterm elections this November, and with an unprecedented and still unfolding cross-border dispute over tariffs, Ottawa continues to push for intensive trilateral talks to continue this summer.

A government official familiar with the negotiations told the National Post that:

“Our priority has always been to conclude a mutually beneficial agreement as quickly as possible and that, I think, remains our goal…[t]hat’s what we’re going to stay focused on. We’ll see where it goes.”

In an interview with Fox News earlier this week, President Trump said that he would be able to quickly sign a revised NAFTA agreement, but would rather land a better deal for the U.S.

The President has also repeatedly said that he would be open to concluding separate agreements with Canada and Mexico.

Escalating Trade Fight

These comments come in the wake of an unprecedented cross-border trade fight with both Canada and the U.S. introducing punitive tariffs on certain imports.

Ottawa advised this week that in response to Washington’s tariffs on Canadian steel and aluminum they would institute dollar-for-dollar reciprocal tariffs on steel and aluminum, as well as an additional list of consumer goods.

President Trump has escalated the dispute and threatened to implement tariffs in the auto sector- a move that has the potential to be far more damaging to the Canadian economy than steel and aluminum duties.

The ongoing tariff dispute will create a tense backdrop for any further NAFTA talks.

Ongoing Dispute Over Trade Barriers in Agriculture

White House spokeswoman Sarah Sanders noted this week that Canada’s retaliatory measures will only hurt American workers while doing nothing for Canada, saying:

“We’ve been very nice to Canada for many years and they’ve taken advantage of that, particularly advantage of our farmers.”

President Trump told Fox News that he recently proposed to his G7 partners that all seven nations remove trade-related barriers and taxes, citing dairy as an example.

Meanwhile, Prime Minister Trudeau has insisted that the President’s complaints about Canadian trade barriers stem from Canada’s refusal to give in to his demands to remove Canada’s supply-management system, intended to protect dairy, poultry, and egg farmers.

Canada’s Position

Canada intends to forge ahead with negotiations throughout the summer. According to a report by the Canadian Press, Foreign Affairs Minister Chrystia Freeland noted that she spoke with U.S. Trade Representative Robert Lighthizer six times in late June, and expects talks to escalate as summer goes one.

This week, Prime Minister Justin Trudeau spoke with Lopez Obrador on the phone, discussing a “mutually beneficial economic and trading relationship between the two countries” and “their shared priority of updating [NAFTA] for the betterment of their peoples”, according to the Prime Minister’s office.

Mexico’s Position

Mexican elections concluded this week, with the election win going to Andres Manuel Lopez Obrador.  Obrador has noted his support for the continued renegotiation of the trade agreement, and also noted that he would like his own team of experts to be part of the talks before he takes office in December. Until that time, members of the current administration will continue to serve as the country’s lead negotiators.

The Financial Post reports that the incoming Mexican president could push back hard on U.S. demands to introduce minimum wage to Mexico’s auto industry, which could impact overall positions of the three nations.

Throughout his campaign, the President voiced protectionist views towards foreign investment and global trade. His stance on NAFTA simultaneously celebrated the agreement’s successes while criticizing its failure to improve the lives of Mexico’s poor (a key group that voted for him).

One outstanding auto sector issues are addressed, the remaining NAFTA sticking points will largely be between Canada and the U.S., including on matters such as intellectual property, supply management, and government procurement.

We will continue to follow these and other NAFTA issues, and will provide updates as they become available.  In the interim, if you have begun to anticipate what impact the ultimate outcome of the negotiations will have on your business in Canada or the U.S., contact the knowledgeable team at Feigenbaum Tax Law. To make an appointment, contact us online, or call our office toll free at (877) 275-4792.