Although negotiators reached a last-minute deal with their Canadian and Mexican counterparts to update the North American Free Trade Agreement (or as Trump plans to dub it, the USMCA), he said on Monday that his steel and aluminum tariffs of 25 percent and 10 percent will remain in place, calling American legislators who take issue with the tariffs “babies.”
“Without tariffs, we wouldn’t be talking about a deal—just for those babies out there that talk about tariffs,” Trump said when announcing the trade agreement, adding that he was partly referring to members of Congress who oppose his use of tariffs, just in case anyone hadn’t connected the dots. (It’s worth pointing out here that Iowa senator Joni Ernst, an outspoken opponent of Trump’s tariffs, was sitting in the front row of the Rose Garden event.)
Trump’s tariffs, imposed under national security concerns via Section 232 of the Trade Expansion Act, have been met with retaliatory tariffs from Mexico and Canada, which will likely remain in place on select American industries such as agriculture, until the situation changes.
Trump administration officials say there is not a timeline for removing the steel and aluminum tariffs, and that the question will have to be addressed separately from the new agreement. Pennsylvania Republican Pat Toomey wrote in a statement on Monday afternoon that he was concerned by several provisions of the new deal, as well as the fact that the steel and aluminum tariffs had not yet been placed on the chopping block.
Canada was able to secure an arrangement to avoid Trump’s threatened tariffs on automobiles, however. According to the Toronto Star’s Daniel Dale, a side letter would exempt 2.6 million of Canada’s annual car imports from potential Section 232 tariffs on automobiles in the future. Dale notes that Canada sends only about 1.8 million automobiles to the United States annually, meaning the agreement would leave the Canadian auto industry unscathed, and with some wiggle room for good measure.
Apart from tariffs, Trump’s trade deal addresses such issues as auto manufacturing requirements. The deal states that at least 75 percent of a car's or truck’s components must be manufactured in Canada, the United States, or Mexico in order to qualify for duty-free status. The current level is 62.5 percent. It would also impose a requirement that at least 30 percent of the auto manufacturing process in Mexico be done by auto workers who make at least $16 an hour by 2020.
Most Republican members of Congress responded positively to the announcement on Monday, considering how close the White House came to scrapping NAFTA and pursuing a bilateral trade deal with Mexico that left out Canada amid disagreements about issues such as dairy market access. As late as Thursday afternoon, U.S. Trade Representative Robert Lighthizer had been telling members of the Senate Finance Committee that he expected to take the bilateral tack. South Dakota Republican John Thune emerged from that meeting discouraged and highly skeptical about the odds of reaching a deal with Canada.
Lawmakers were concerned that a bilateral deal with Mexico would not only disrupt supply chains and widely harm American businesses and consumers, but also that it may not have complied with Trade Promotion Authority.
But the parties worked feverishly through the weekend, managing to overcome disputes that had previously stalled the negotiations. The rush was due in part to current Mexican President Enrique Pena Nieto’s imminent departure: the United States and Mexican governments hoped to sign the agreement before Nieto leaves office at the end of November. The TPA timeline required negotiators to produce agreement text by late Sunday night in order to pull it off.
After the signing, the deal will have to be approved by Congress. The state of play in the Capitol is uncertain for the most part, as the deal won’t come up for consideration until 2019, after the new Congress is elected and sworn in.
If Democrats regain control of one or both chambers, it could make passage more difficult due to political pressure to oppose Trump, even as some Democratic lawmakers have found themselves in agreement with the administration’s approach to a number of trade issues throughout the 13-month negotiation. “Democrats will closely scrutinize the text of the Trump Administration’s NAFTA proposal, and look forward to further analyses and conversations with stakeholders,” House minority leader Nancy Pelosi said in a statement.
Speaking about Congress’s role in the matter on Monday, Trump told reporters that hypothetically, one would think his deal would run into few problems in Congress, but observed that "anything you submit to Congress is trouble."