Trump threatened to terminate NAFTA. Canada and Mexico shrugged
U.S. President Donald Trump threatened, once again, to quit the NAFTA treaty during a rally with supporters in Phoenix, Arizona on Tuesday.
“Personally, I don’t think we can make a deal … I think we’ll end up probably terminating NAFTA at some point,” the president said.
But that statement didn’t seem to rattle Canada’s financial markets. The loonie barely budged in reaction to the comments.
WATCH BELOW: Trudeau says Canada’s focus on NAFTA unchanged in wake of Trump threat
That’s because Trump’s bombastic rhetoric on the trade agreements is starting to sound hollow, experts told Global News.
“People are getting used to Donald Trump and the way in which he bluffs and attempts to shock and awe people with statements like ‘we’ll pull away from NAFTA,'” said Christopher Sands.
In his bestselling book, The Art of the Deal, Trump talks about making unrealistic demands and threatening to walk away from the table as a negotiating tactic meant to shift the talk in one’s favour, Sands noted.
It’s a device the U.S. president has already deployed several times with NAFTA, but now “people are starting to catch up,” he added.
Mexico’s Foreign Minister Luis Videgaray has already brushed off Trump’s comments as little more than a negotiating tactic on Wednesday.
“He’s negotiating in his own particular style,” Videgaray said, speaking on local television.
Coverage of NAFTA on Globalnews.ca:
Trump might not have the power to unilaterally kill NAFTA
It’s not clear that the U.S. president would be able to unilaterally rescind NAFTA, even he wanted to, noted Carlo Dade, director of the Trade and Investment Centre at Canada West Foundation.
Congress is responsible for regulating international trade under the U.S. constitution, Dade noted.
“There’s a real constitution question as to whether the president can undo something that Congress has done.”
Many legal scholars believe he can’t, Dade added.
U.S. presidents may negotiate trade deals, but it is Congress that has the last word and puts legislation into effect to implement the treaties.
Undoing NAFTA would also require undoing all the legislation that was drafted in order to allow the deal to come into force, said Dade.
Of course, Trump could end NAFTA if he got U.S. lawmakers on board, but that, too, seems tricky.
Canada has put in a lot of legwork going to U.S. congressional districts and explaining the importance of NAFTA to the local job market and economy, Dade noted.
“People in those congressional districts have started to realize that ‘hey, my job and my neighbour’s job – or a certain per cent of the income in our district – is tied to trade with NAFTA.”
For that reason, it’s extremely unlikely that Congress would go along with scrapping NAFTA, Dade said.
Trump was likely pandering to his supporters when he made the comments in Phoenix, he added.
It’s something Prime Minister Justin Trudeau has done, too, when his government outlined a push for “progressive” NAFTA chapters on the environment, labour, gender rights and Indigenous relations.
Those requests likely “won’t have much impact,” said Dade. But they might please Trudeau’s base.
Canada and Mexico have realized the world won’t end, even if NAFTA does
Another likely reason why Canada’s financial markets barely reacted to Trump’s statement is that investors have already priced in the possibility that the trade agreement might end, said Sands.
For Canada, “there would be trouble, but it would be survivable.”
For Mexico, a poorer nation, the consequences would be more serious – not to mention the fact that uncertainty about NAFTA is compounding investor nervousness about the country’s upcoming national election in 2018, said Sands. That may be why the Mexican peso took a hit from Trump’s latest threat, while the loonie didn’t.
Still, both Canada and Mexico have taken a sober look at what happens if there is no NAFTA and assessed that it wouldn’t be catastrophic, according to Sands.
“They’ve taken the measure of Trump and have decided not to let him push them off the mark.”
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