Over the weekend, President Trump threatened to tear up the North American Free Trade Agreement (NAFTA) if Canada refuses to concede to the terms.
In fact, the President tweeted there is "no political necessity to keep Canada in the new NAFTA deal," referring to the tentative bilateral agreement the United States reached with Mexico. "If we don't make a fair deal for the U.S. after decades of abuse, Canada will be out."
One issue is Canadian tariffs on agriculture. Trump wants Canada to end its tariffs on U.S. dairy products, which he claims hurt U.S. farmers.
Canada charges an average tariff of 249% on dairy products shipped into the country, according to the World Trade Organization.
However, Canadian Prime Minister Justin Trudeau pledged to protect Canada’s dairy industry.
Bilateral Agreement with Mexico
“I intend to enter into a trade agreement with Mexico—and with Canada, if it is willing -- in a timely manner,” Trump said, according to The Wall Street Journal.
However, Trump’s willingness to move on without Canada has led to a good deal of confusion and concern among lawmakers — who said it may not be legally permissible as that supply chains depend on all three countries.
“Because of the massive amount of movement of goods between the three countries and the integration of operations which make manufacturing in our country more competitive, it is imperative that a trilateral agreement be inked,” explained Jay Timmons, president and CEO of the National Association of Manufacturers, as quoted by The New York Times.
With regards to Mexico, a revised deal makes significant alterations to rules governing automobile manufacturing. For example, companies would be required to manufacture at least 75% of an automobile’s value in North America under the new rules, up from 62.5% to qualify for NAFTA’s zero tariffs.
“They will also be required to use more local steel, aluminum and auto parts, and have 40 to 45 percent of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada and a win for labor unions, which have been among NAFTA’s biggest critics,” noted The New York Times.
It should be interesting to see what happens next.
We’ll keep you updated on developments as talks continue with Canada.