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Trump says he might drop tariffs for Mexico and Canada — if they do what he wants on NAFTA

Trump tweeted he might exempt Canada and Mexico from steel and aluminum tariffs if they agree to a “fair” NAFTA.

Donald Trump hosts Canadian Prime Minister Justin Tudeau at the White House. Kevin Dietsch-Pool/Getty Images
Emily Stewart covers business and economics for Vox and writes the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

President Donald Trump in a pair of early morning tweets on Monday appeared to suggest wanting to use his proposed tariffs on aluminum and steel imports as a bargaining chip in negotiations of the North American Free Trade Agreement (NAFTA). The tweets come as representatives from the US, Mexico, and Canada wrap up the latest round of NAFTA talks Mexico City on Monday.

“We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for USA. Massive relocation of companies & jobs,” Trump wrote. “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.” He also said that Canada must “treat our farmers much better” and that Mexico should do more on “stopping drugs from pouring into” the United States.

On Thursday, Trump announced plans to implement a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports to the US. The maneuver rattled markets and garnered widespread blowback in the US and abroad. Senate Finance Committee Chair Orrin Hatch (R-UT) said the tariffs are “not going to help America” and whoever recommended them to Trump should be “reprimanded.” Canadian Prime Minister Justin Trudeau said the tariffs would be “absolutely unacceptable.”

White House officials have said that the tariffs will be applied globally and without exceptions for allies.

“There will be an exemption procedure for particular cases where we need to have exemptions so that business can move forward, but at this point in time, there will be no country exclusions,” Peter Navarro, a top trade adviser to Trump, said in an interview with Jake Tapper on CNN’s State of the Union on Sunday. Commerce Secretary Wilbur Ross seemed to leave the door open to specific country exceptions when asked about them by Chuck Todd on NBC’s Meet the Press on Sunday. “We’ll see. The president makes the decisions,” he said.

Mexico and Canada were exempted when former President George W. Bush imposed steel tariffs in 2002.

Trump seems like he’s gunning for a trade war

Trump’s Monday tweets are part of an ongoing effort to pressure Mexico and Canada in renegotiating NAFTA, one of Trump’s principal campaign promises. On the campaign trail, he called NAFTA the “worst trade deal” in history. As president, he has set out to reduce the trade deficit (meaning the US isn’t importing much more than it exports) with Mexico and Canada. He has also criticized Mexico specifically for cheap imports that he believes undercut US manufacturers.

Trump has repeatedly threatened to pull the US out of NAFTA if he is displeased with a new agreement. If and when NAFTA negotiations will bear fruit is unclear, as Mexico’s presidential election in July is likely to slow progress.

Retaliation for Trump’s steel and aluminum tariffs, which the White House has signaled could drop as soon as this week, could come much faster. Europe has already begun considering duties on US imports of items such as Harley Davidson motorcycles, bourbon, and Levi’s blue jeans.

President Trump tweeted that if Europe increases its tariffs and barriers, the US will “simply apply” a tax on their car imports to the US.

A string of such retaliatory measures could lead to a trade war, which would likely have damaging effects in the US and across the globe. Trump tweeted over the weekend that trade wars are “good” and “easy to win,” but that does not seem to be the case, according to trade experts, many business groups, and even many Republicans. Vox’s Zeeshan Aleem has a complete explainer on Trump’s potential trade war.

Senator Lindsey Graham (R-SC) in an appearance on CBS’s Face the Nation on Sunday asked the president to reconsider his position on tariffs. “It’s only going to hurt American consumers and our allies,” he said.

“I don’t know anybody who thinks that trade wars are something you win. Everybody, all economies, will be adversely affected, the only question is how much,” Michael Froman, who was United States trade representative under the Obama administration, told me in an interview on Sunday.

Despite resistance, Trump doesn’t seem to be slowing down. Ross told NBC’s Todd that he has “no reason” to think Trump won’t go ahead with the tariffs this week, and the president’s Twitter feed certainly shows no signs he’s rethinking his position. “To protect our Country we must protect American Steel!” he wrote in a separate tweet on Monday. “#AMERICA FIRST.”