Trade War Watch: NAFTA Window Almost Closed, Canada Still Isn't Interested

The United States is getting extremely close to having to move forward on its NAFTA deal with Mexico without Canada, according to White House economic adviser Kevin Hassett.

“I’m a little surprised that the Canadians haven’t signed up yet,” Hassett said in an interview with Fox News. “I worry that politics in Canada is trumping common sense because there’s a very good deal that was designed by Mexico and the U.S. to appeal to Canada. And they’re not signing up and it’s got everybody over here a little bit puzzled.”

On Thursday, Canadian Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer met in Washington to discuss terms. However, no agreement was reached.

“We discussed some tough issues today, the atmosphere continues to be constructive, and we continue to work hard towards a deal,” Freeland told the media. “I chose my words carefully: Today we discussed some tough issues, the conversation was constructive.”

Trump struck a side-deal with Mexico last month and has begun threatening to exclude Canada if it won’t agree to his terms. He also said he might impose a 25 percent duty on Canadian auto exports, possibly simply to rattle negotiators into playing ball.

Canada is seeking some kind of guarantee that, if a deal is reached with the United States, it won’t include those lofty auto tariffs. According to Bloomberg, Unifor President Jerry Dias, head of the union representing Detroit Three autoworkers north of the border, hung around the meeting to talk to the press about it. He said an agreement without a no-tariff assurance would be foolish, adding that Canadians aren’t stupid.

“Why would Canada sign a trade agreement that deals with all the important issues and then have Donald Trump impose a 25 per cent tariff on automobiles?” Dias asked reporters while trade discussion progressed between Freeland and Lighthizer.

It’s a good question, but may be one the United States is less interested in seeking an answer for anymore. Hassett says a standalone deal with Mexico is right around the corner, in which case NAFTA is effectively over if an agreement can’t be reached with Canada before October 1st.

It’s another self-imposed target that could go ignored but the U.S. seems steadfast in its adherence to it. While previous deadlines have passed during the arduous, year-long negotiations aimed at revising NAFTA, pressure on Canada to sign a deal has never been higher. While asking for quite a bit initially, America has repeatedly rolled back its demands and now wants to push something through Congress before Mexico’s new government takes office on December 1st of this year.

Meanwhile, reports have come in that U.S. negotiators want Canada cap its auto exports to the United States at 1.7 million vehicles a year. However, industry sources have said such a cap has not been officially discussed and would be deemed unacceptable anyway. Mexico’s deal is rumored to cap tariff-free or nearly duty-free Mexican imports to the United States at 2.4 million vehicles. Canada currently sends the U.S. roughly 2 million vehicles annually.

[Image: NAFTA Secretariat]