North American trade deal in peril after Mexico tariff threat, US lawmakers say

Trucks crossing the border between the United States and Mexico. US lawmakers have urged president Donald Trump to abandon his plan to levy 5 per cent tariffs on all Mexican imports. PHOTO: REUTERS

WASHINGTON (WASHINGTON POST) - US lawmakers from both parties, including several top Republicans, warned on Monday (June 3) that President Donald Trump was risking the destruction of a pending trade deal with Mexico and Canada by preparing to slap import penalties on Mexican goods.

The lawmakers urged Trump to abandon his plan to levy 5 per cent tariffs on all Mexican imports beginning next week. Otherwise, they said, the pending trade deal known as USMCA will probably fail.

"I think this calls into question our ability to pass the USMCA, much less get it passed by Canada and by Mexico," Sen. John Cornyn, R-Texas, told reporters Monday.

"And so we need to put our heads together and try to come up with a solution."

Republicans rarely have opposed the president in public in a way that threatened one of his key agenda items. And the growing opposition by the GOP to the new tariffs marked a potential testing point between the president and his party. To date, Republicans have generally acquiesced as Trump has turned their traditionally pro-free-trade party upside down and imbued it with protectionist tendencies.

White House officials remained insistent on Monday that they won't change course. They argued that the new tariff threat is unrelated to the pending trade deal, and they continued to demand that Mexico stop the flow of migrants into the United States.

"As a sign of good faith, Mexico should immediately stop the flow of people and drugs through their country and to our Southern Border," Trump tweeted during a state visit to London. "They can do it if they want!"

If Congress did not approve the United States-Mexico-Canada Agreement - Trump's proposed successor to the 1994 North American Free Trade Agreement - he could face a setback ahead of the 2020 elections.

During his successful presidential campaign, Trump repeatedly vowed to replace the long-standing trade agreement between Canada and Mexico in favour of a better deal.

The disconnect between Trump and Congress appeared to deepen, in part because lawmakers said they couldn't tell whether Trump was bluffing or whether there was little Mexico could do to change his mind.

Several Senate Republicans said they would wait for the results of a major meeting between Mexican trade officials and Secretary of State Mike Pompeo on Wednesday before deciding what to do. They have yet to discuss in detail any legislative options, although they have asked the administration to justify the legal powers it would invoke to impose the tariffs.

"It's been conveyed to them that we would like to have them explain kind of their rationale for what they're doing," said Senate Majority Whip John Thune, R-S.D.

Thune added that if the tariff standoff continues, "Congress is going to want to probably be heard from" in terms of trying to limit Trump's tariff authority. "We have a lot of members who are very concerned, I think, about where this is headed," he said.

Some Republican lawmakers have argued that Congress needs to claw back tariff authority from the executive branch after ceding it to the president. Sen. Patrick Toomey, R-Pa., has introduced a bill that would require congressional approval before a president imposes tariffs under the auspices of national security, and again on Monday made a case for his legislation.

"As a general matter, I think Congress has shifted and delegated way too much power to the executive branch over decades," Toomey said.

"This is not an observation about Donald Trump. That's a general thing that Congress has done, and now we're seeing the consequences of that in ways that nobody expected, nobody anticipated and, frankly, I think, many members of Congress don't agree with."

Trump's surprise announcement last week about new Mexico tariffs stunned lawmakers from both parties, with many worried that it could lead to a spike in costs for US companies and consumers and force Mexican leaders to pull back their support of the pending deal.

Trump proposed 5 per cent tariffs on all goods from Mexico beginning June 10 and increasing them by 5 per cent on the first of each month, until they eventually reached 25 per cent. The US imports close to US$400 billion in goods from Mexico each year, making it a top trading partner.

The new tariffs threat coincided with the administration sending to Capitol Hill a document that's a necessary precursor to a vote on USMCA as the White House pushes for action this summer.

Last year, the White House reached an agreement with the leaders of Mexico and Canada to rework parts of NAFTA, a change Trump hailed as a huge breakthrough for US companies and workers. But the deal can't be rewritten without approval from Congress, and the White House had run into resistance from congressional Democrats who control the House of Representatives and demanded several changes to the agreement.

On Monday, House Democrats warned that unless Trump backs down from his latest tariffs threat, votes on the floor will be hard to find.

"What he's done, I think, is make it more of a chaotic situation, more difficult to get the votes even if we had made the changes, which we haven't, in the new NAFTA," said Rep. Bill Pascrell, D-N.J., a senior member of the House Ways and Means Committee, predicting that the timetable for a vote on the deal will slip into next year.

At that point, in the heat of a presidential campaign, many lawmakers think passing a massive trade deal would become all but impossible.

The prospect of congressional approval appeared to gain steam when the White House agreed to lift steel and aluminum tariffs from Canada and Mexico several weeks ago, but last week's tariff threat immediately stopped the momentum.

Since then, Republicans trying to persuade the president behind the scenes with one-on-one phone calls, replicating the strategy they used to talk Trump off the steel and aluminum tariffs he imposed on Canada and Mexico last year. Republicans had repeatedly made the case in private to Trump that those tariffs would imperil the prospects of ratifying his new trade deal with those nations; Trump lifted those duties last month.

Cornyn expressed hope that Trump still could be persuaded to change course on his latest tariff threat.

"We don't even know what the president's ultimately going to do," Cornyn said. "I know he's, sometimes in his frustration, expressed his intention to do certain things but after calm reflection and consultation with the members of the Congress has decided maybe to pursue a different course, so that's what I hope would happen here."

Sen. Joni Ernst, R-Iowa, told reporters on Monday that she had spoken to Trump about his tariff threat over the weekend and urged him to back down, but he appeared to be unmoved.

"He's a tariff guy," said Ernst, who added that she was "not pleased" about the tariffs.

Sensing the danger, the White House started damage control on Monday, although without showing signs of backpedaling. A senior administration official met with Senate Republican communications officials in the morning to help shape messaging on the issue and urge support for the new trade deal.

The White House official told top GOP aides that the president is serious about the 5 per cent tariffs on Mexico, according to one aide in the room who spoke on the condition of anonymity to describe the meeting.

But the official then pivoted to the USMCA, arguing that farmers need it and describing it as "completely separate and different from the immigration tariffs," the aide said.

Yet for US lawmakers, Mexican and Canadian officials, and many leaders in the business community, the two issues cannot be separated so easily.

John Murphy, senior vice president of international affairs at the US Chamber of Commerce, said there has been "new momentum" behind the trade deal, especially after Trump recently lifted tariffs on steel and aluminum from Canada and Mexico.

"But this latest tariff threat represents a major new obstacle to approval of USMCA, and the chamber is urging the administration to abandon this threat immediately," Murphy said.

Join ST's Telegram channel here and get the latest breaking news delivered to you.