(Bloomberg) -- President Donald Trump is warning Canada that any renegotiated North American Free Trade Agreement must be “a fair deal, or there will be no deal at all,” escalating a leader-level standoff triggered by U.S. tariffs on steel and aluminum.
“The United States has been taken advantage of for many decades on trade,” Trump said in a statement released Thursday night by the White House. “Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United States will agree to a fair deal, or there will be no deal at all.” He followed up with a tweet Friday criticizing Canadian agricultural policy.
The statement was an apparent response to remarks made by a frustrated Trudeau earlier Thursday, when he announced retaliatory tariffs. The Canadian leader said a planned meeting with Trump to potentially seal a Nafta deal collapsed after Vice President Mike Pence called and insisted the meeting was conditional on adding a sunset clause.
The development is the latest sign of leaders hardening their positions -- Trudeau said he saw an accord within reach but other core disputes remain, including the sunset clause. Canada and Mexico have signaled there’d only be a quick deal if the U.S. made concessions on outstanding issues to seal a win on automobiles. If the U.S. digs in instead, Nafta talks look set to drag on, or worse: Trump repeatedly threatens to quit the current Nafta altogether.
In a broadening of trade tensions, America’s closest allies plan to slap billions of dollars in tit-for-tat tariffs on U.S. goods after the Trump administration announced it’s imposing steel and aluminum duties on them. The reaction was swift after Commerce Secretary Wilbur Ross announced the U.S. on Friday will levy new metals duties on imports from the European Union, Mexico and Canada on national security grounds, ending their temporary exemptions.
Quitting Nafta would be yet another explosive and controversial trade move by the Trump administration. The U.S., Canada and Mexico trade more than a trillion dollars in goods annually. It would also signal no one is safe: Mexico and Canada are the top two buyers of U.S. exports.
Trump made his threat Thursday, but Trudeau made the same one two days earlier. He said during a Bloomberg interview in Toronto that killing Nafta -- the existing 1994 deal, as Trump threatens -- is better for Canada than swallowing a bad deal to update it.
“No Nafta is better than a bad deal, and we’ve made that very clear to the president,” the prime minister said.
Trump followed up Friday morning with a tweet saying Canada had treated U.S. farmers poorly. “They must open their markets and take down their trade barriers!” he wrote. “Do Timber & Lumber in U.S.?” It was unclear what he was referring to; the U.S. is already applying tariffs to Canadian softwood lumber.
Nafta talks continue, with a deal needed probably within days to have any hope of passing the current U.S. Congress -- as had been the Trump administration’s goal -- and with Mexican elections one month away. Failing to reach an accord on an update doesn’t necessarily mean Nafta is dead, though. The existing pact remains on the books. Any country can quit on six months’ notice, which isn’t binding, in that they can give notice and never actually quit. No country has yet given notice, though Trump threatens to.
Earlier Thursday, Wilbur Ross, in announcing the steel and aluminum tariffs against U.S. allies, including Canada and Mexico, said the Nafta talks were “taking longer than we had hoped” to complete. “The status to which they got did not justify continuing exemption from the tariffs based on the national security considerations of the overall situation,” he said.
Ross also said there was “no longer a very precise date when they will be concluded.” Taken with Trump’s statement, that signals the Nafta partners are entrenched -- and the window Trudeau saw to sew up a deal may have closed.
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