Trump Blusters on NAFTA Termination, But Experts Say Renegotiation On Course
On Wednesday, amidst discussions regarding NAFTA, President Trump hinted that scrapping the deal altogether would create the "best deal," according to Reuters.
"We're renegotiating NAFTA now," he said. "We'll see what happens. I may terminate NAFTA. A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don't realize how good it would be to terminate NAFTA because the way you're going to make the best deal is to terminate NAFTA. But people would like to see me not do that."
According to reports today, the president seems to have cooled his stance on terminating the 24-year old agreement.
Reuters, after polling 45 economists with knowledge on the subject, said that a vast majority predict that renegotiations will end with only minor changes.
"We expect a modernized agreement after a bumpy and lengthy negotiation and approval process," Carlos Capistran, head of Canada and Mexico economics at Bank of America Merrill Lynch, told Reuters. "It will be an update … with marginal changes. The bulk of it will remain the same."
The sixth round of renegotiation talks will take place next Tuesday in Montreal, and is expected to include a proposal to mandate additional automobile manufacturing in the U.S., a dispute settlement mechanism and a five-year sunset claus. Canada and Mexico reportedly have disputed the issues raised by the U.S. officials.
Canadian officials are aware of Trump's negotiation tactic of threatening to withdraw from the agreement, but Canadian Prime Minister Justin Trudeau said that all parties are "[staying] focused on the hard work we have ahead of us at the negotiation table. I don't see anything changing in that."
If the agreement is reworked as economists predict it will be, it could end with a moderate bump in the Mexican peso's value, with the Canadian dollar either increasing slightly or remaining the same. Conversely, those same experts believe that if the agreement is scrapped, as the president has threatened, it could damage all three currencies, including a 5 percent depreciation of the U.S. dollar.
"We are dangerously close to allowing an ill-informed group to lose all that NAFTA has delivered in terms of competitiveness of North American companies," Diane Swonk, chief economist at Grant Thornton, told Reuters.