Mexico retaliated against the United States on Tuesday, imposing tariffs of around $3 billion worth of American pork, steel, cheese, and other goods in response to the Trump administration's steel and aluminum levies. The retaliation further strained relations between the two countries as they struggle to reestablish the North American Free Trade Agreement.
The tariffs, which were announced last week, came into effect as the Trump administration stoked the flames of the already-heated NAFTA talks. Officials are now saying the administration wants to divide discussions with Canada and Mexico and work on separate agreements rather than continue three-country discussions to rewrite the 1994 trade deal.
"These tariffs will exact immediate and painful consequences on many American farmers," Angela Hofmann, deputy director of Farmers for Free Trade, said in a statement. "Hog, apple, potato and dairy farmers are among those suddenly facing a 10 or 20 percent tax hike on the exports they depend of for their livelihoods. Farmers need certainty and open markets to make ends meet. Right now they are getting chaos and protectionism."
Trump's top economic adviser, Larry Kudlow, went on "Fox & Friends" on Tuesday to convey the president's preference for dealing separately with Canada and Mexico. Kudlow said Trump doesn't plan to abandon NAFTA - something the president has threatened to do since taking office - but "is just going to try a different approach."
In saying there is no plan to leave NAFTA, "he's probably trying to keep the markets calm...while [the US negotiates] separate bilateral agreements."
Trade analysts said they were skeptical that Canada and Mexico, angry that the US has slapped tariffs on their steel and aluminum, would be drawn into one-on-one negotiations to appease Washington.
"This divide-and-conquer strategy is not entirely unexpected, especially now that the three-way negotiating process seems to have hit a wall," said Mary Lovely, an economist at Syracuse University.
Shortly before leaving Washington for the summit, Trump threatened to withdraw from the pact -- reversing Kudlow's earlier statement that Trump wouldn't walk away. "If we're unable to make a deal we'll terminate Nafta," Trump said Friday morning. "With that being said I think we'll probably easily make a deal."
Still, Trump has consistently expressed his preference for reaching agreements with other countries one at a time, rather than establishing multilateral agreements like NAFTA or a 12-country Asia-Pacific deal he abandoned upon taking office last year. Earlier this year, he nudged South Korea into making concessions and accepting changes to a six-year-old trade pact between the two countries.
It is possible that the United States can solidify a separate agreement with Canada. The Trump administration says it wants the majority of auto manufacturing to be produced by workers earning around $15 an hour. This is not a problem for Canada. However, it is for Mexico, where factory workers usually earn less than $5 an hour.
It must be noted that Mexico is expected to elect a new president - the left-leaning Andrews Manuel Lopez Obrador - who would likely take a harder line in talks with the United States.
