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Trump Defies Trudeau, Agrees To Deal With Mexico

United States and Mexico Agree to NAFTA deal without Canada

After months of contentious back and forth negotiations, the Trump Administration finally reached an accord with Mexico regarding on tariffs.  Regarding the deal, Trump said “I like to call this deal the United-States Mexico Trade Agreement.  I think it’s an elegant name.  I think that NAFTA has a lot of bad connotations because the United States was hurt very badly by NAFTA for many years.”  While the deal was originally intended to be trilateral, Trudeau’s unwillingness to negotiate left Trump with no choice but to move ahead with the bilateral agreement with Mexico.  Today’s deal shows how President Trump continues to deliver on his campaign promises to bring well-paying manufacturing jobs back to America and further solidifies his blue-collar base ahead of midterm elections.

The new deal will be a boon to US autoworkers as the deal will require that 75 percent of car content be made in the United States or Mexico and that 40 to 45 percent be made by workers earning at least $16 per hour.  This new requirement was crucial to ensuring that the United States’ $69 Billion trade deficit with Mexico shrunk.  Additionally, the deal offers 10-year intellectual property protections to US pharmaceutical companies in a move that will continue to encourage US firms to spend money on R&D for new treatments and drugs.  The markets responded strongly to the breakthrough news with both the S&P 500 and NASDAQ reaching all-time highs led by strong gains in the automotive and railroad sectors.

Upon hearing the news that the United States and Mexico had agreed to a deal without Canadian support, Canadian Foreign Minister Chrystia Freeland cut short her European trip to return to Washington in order to restart stalled negotiations.  In a statement, Freeland continued the strong Canadian rhetoric by declaring, “We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required.”  President Trump has thus far refused to negotiate tariffs with Canada while Prime Minister Trudeau insists on protecting the dairy industry at the expense of American farmers.  It is now up to Canada if it would like to sign the deal Trump’s self-imposed Friday deadline.  If Canada refuses to sign, the administration has indicated that it will move forward with the bilateral agreement thereby leaving Canada out in the cold.

The administration’s success in pushing for major concessions by trading partners has proven that President Trump’s rhetoric against unfair trade deals has been borne out.  Both the EU deal and the Mexico deal today will provide a framework for an eventual deal with China.  That deal may have to wait though as Trump stated today that, “They want to talk, but it’s been too one-sided for too many years, for too many decades and so it’s not the right time to talk.”  In the meantime, maybe the American people can take a well-deserved break from all of the winning.

Written by Peter Bergstein

Peter Bergstein is a contributor to The Schpiel.

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