When the world is closely watching the trade war between U.S. and China, Trump has started his plan to spread the intension to Canada and Mexico, two close US allies. Trump’s economic adviser Larry Kudlow said the president may seek separate talks with Canada and Mexico in NAFTA negotiations to get individual trade deals with the two countries.
Canada, Mexico have been in months of negotiations with U.S. to rework the NAFTA, which Trump has long criticized as having harmed the U.S. economically. But now, Trump showed his preference to reach separate trade pacts with the two U.S. neighbors, which also intensified the trade relations since Trump announced to impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union after the two-month exemption. In addition, he also conducted an investigation which may bring restrictions on imported autos— a cornerstone of trade between the US, Canada, and Mexico.
To response the U.S., Canada announced the “the strongest trade action” – $16.6 billion of retaliatory tariffs; Meanwhile, Mexico also said it would impose “equivalent measures” on US products; the EU bloc would move forward with tariffs on equal value to the steel and aluminum measures, sparking the trade war among the North American neighbors.
The purpose of those actions, as explained by Trump is to reduce the trade deficit between the US and other countries.
However, economists believe it’s not a good idea that Trump pays intense focus on decreasing trade deficit, especially targeting at its allies. It’s likely that the president may forget the mark with his latest trade moves.
In fact, Canada and Mexico only attribute to less than 10% of the total U.S. trade deficit. In addition, U.S. trade deficit with neighbors has only seen moderate increase since NAFTA’s implementation in 1994, while the broader deficit ballooned.
The Florida Chamber of Commerce, a statewide pro-business group warns Trump’s steel and aluminum tariffs on Canada, Mexico and EU will negatively affect Florida economy. “The trade war could put Florida’s consumers, families and jobs at risk.” the Chamber said in a statement.
Senate Republicans have tightened nerves to the possible trade war, GOP senators are planning to unveil legislation to limit President’s power on trade. In that case, Trump, or any future president, wouldn’t be capable to invoke national security as a reason for taxing foreign imports. It’s a rare and unusual action they take to use legislation to limit controversial policies embraced by Trump.
It should be Congress’s authority in the Constitution to oversee trade. But the power has shifted to the White House over time. GOP’s action is also trying to restore that power to Congress. So far, the plan is gaining support, even among some of Trump’s allies.
Even with the positive momentum, we believe it won’t be easy to force the president to give up some power on trade.