Trump’s surprise trade strategy threatens new NAFTA

President Trump has imperiled his revised North American trade deal with two surprise decisions meant to increase pressure on Congress and the Mexican government.

Trump ignited bipartisan backlash Thursday night when he said he would impose tariffs on all imports from Mexico if the country could not stop the flow of migrants into U.S. over the southern border.

The shocking announcement came hours after his top trade negotiator angered House Democrats by starting the clock on congressional confirmation of an updated version of the North American Free Trade Agreement (NAFTA).

{mosads}Trump’s Thursday night power plays have two apparent goals: to speed up approval of the new NAFTA, and to crack down on rising border crossings into the U.S.

But his move to tie trade negotiations to a bitter dispute over immigration enraged lawmakers on both sides of the aisle, raising the odds that the new NAFTA will die on Capitol Hill.

“Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent,” said Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, in a Thursday statement. “Following through on this threat would seriously jeopardize passage of [the deal], a central campaign pledge of President Trump’s and what could be a big victory for the country.”

Trump’s new strategy reflects the struggle to advance his trade and immigration agendas. With the presidential primaries less than a year away, the window is beginning to close on gaining congressional approval of the new NAFTA before the 2020 campaign heats up and hinders bipartisan dealmaking.

The president has also failed to reach an agreement with Democrats over border security funding and curbing the number of migrants crossing into the U.S. through Mexico.

With limited progress toward fulfilling two major campaign promises — on trade and immigration — Trump has dialed up the pressure on lawmakers to secure the new NAFTA and the southern border, tying the issues together.

{mossecondads}The president said Thursday he would impose a 5 percent tariff on goods from Mexico, starting June 10 and lasting until the country is able to stop migrants from entering the U.S. The tariff would increase monthly, reaching up to 25 percent.

“Mexico has taken advantage of the United States for decades. Because of the Dems, our Immigration Laws are BAD.” Trump said in a Friday tweet. “Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”

White House trade adviser Peter Navarro argued Friday that Trump would not have needed to impose tariffs if lawmakers passed immigration reform and approved the new NAFTA.

“We’re waiting for them to do their job on border security. We’re waiting for them to do their job on infrastructure. We’re waiting here trying to do our job, but the president’s job is to defend our borders and defend this nation,” Navarro said on CNBC.

GOP lawmakers share much of Trump’s concern over immigration, and support the new NAFTA. But several Senate Republicans warned that tying the issues together could doom the trade deal.

“If the president goes through with this, I’m afraid progress to get this trade agreement across the finish line will be stifled,” said Sen. Joni Ernst (R-Iowa). “While I support the need for comprehensive border security and a permanent fix to illegal immigration, this isn’t the right path forward.”

Tariffs on Mexican goods could have severe economic implications for American businesses and consumers. The U.S. imports more products from Mexico than from any other country, due in part to the growing integration of the two economies and supply chains established after the 1994 NAFTA.

“Autos will be more expensive; so will avocados, mangos, apparel, electronics and much else,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, in an email.

Tori Whiting, a trade economist at the conservative Heritage Foundation, added that “if the president fully implements this threat, with 25-percent tariffs on nearly everything, the U.S. and Mexico trade barriers would rise to or above pre-NAFTA levels.”

Mexico is likely to retaliate with a carousel of tariffs targeting products unique or particularly important to congressional districts or states that make up a key portion of Trump’s base. That could compound the economic pain in agricultural communities that have already been hit hard by the trade war with China.

Sen. Martha McSally (R-Ariz.) said that while Congress needs to address “an undeniable crisis at our southern border,” Trump’s tariffs “will harm our economy and be passed onto Arizona small businesses and families.”

And Sen. Pat Toomey (Pa.), the chief GOP critic of Trump’s trade policy, called the new tariffs “misguided” and said Congress needs to “reassert its Constitutional responsibility” on trade policy.

Trump’s proposed tariffs on Mexico have also strained GOP unity at a critical time for his trade agenda.

The president and his aides have struggled to persuade Democrats, including Speaker Nancy Pelosi (Calif.), to move forward with the new NAFTA. GOP lawmakers have also implored Democrats to support the deal, lest Trump follow through on his promise to pull out of the trade pact entirely if his renegotiation isn’t approved.

But Democrats have pledged to oppose the new NAFTA, known as the U.S.-Mexico-Canada Agreement (USMCA), unless Trump agrees to stricter enforcement provisions for environmental and labor standards.

In a bid to boost pressure on Pelosi, the White House on Thursday sent a draft statement of administrative action to lawmakers, an essential step toward securing an eventual vote on the deal.

But the document doesn’t force House action on the new NAFTA, and Democrats are unlikely to move the trade deal on Trump’s timeline.

Pelosi said Thursday that Democrats held productive talks with U.S. Trade Representative Robert Lighthizer and “have been on a path to yes,” but that the White House’s decision to rush the process “indicates a lack of knowledge … on the policy and process to pass a trade agreement.”

“We all agree that we must replace NAFTA, but without real enforcement mechanisms we would be locking American workers into another bad deal,” she said.

With less than two weeks until the tariffs on Mexico are slated to kick in, there is still time for Trump and Congress to find a way to get the new NAFTA back on track. But some analysts see Trump’s risky maneuver falling short on bipartisanship.

“The decision to send the USMCA paperwork over at the same time as the tariff announcement indicates that the Trump administration did not believe that Pelosi was ever going to be willing to let the agreement come to the floor for a vote,” analysts at Washington-based Beacon Policy Advisors wrote Friday in a research note.

“The fact that the White House’s tariff announcement also in part blames Democrats … is further evidence that the president does not believe that a bipartisan compromise is possible.” 

Rafael Bernal and Brett Samuels contributed.