If the U.S. is unable to strike a trade deal with Canada to include it in the replacement of the North American Free Trade Agreement, President Trump may consider imposing another round of tariffs on automobile imports, according to the director of the U.S. National Economic Council.
“The president wants to make a constructive deal that’s great for the United States and Canada, but if not, he has said with great clarity we may be forced to go automobile tariffs, Canadian automobile import tariffs,” Larry Kudlow said during an interview with FOX Business’ Stuart Varney on Tuesday.
On Monday, the U.S. and Mexico negotiated a new pact to replace NAFTA, snubbing Canada in the process. The president also suggested he might leave Canada out of the new agreement -- which would be called the “United States-Mexico Trade Agreement.” Canada is the second-biggest trading partner of the U.S.
Kudlow declined to comment on whether the U.S. and Canada could reach an agreement during renewed talks this week, when Canadian Foreign Minister Chrystia Freeland will arrive in Washington, D.C.
Canada’s auto industry is the ninth-largest in the world, and fourth-largest exporter by value, producing 2.4 million vehicles annually and exporting $48.8 billion worth of vehicles in 2016.
“Canadians really need to look at what the U.S. and Mexico just completed as an example of what can be done if there’s good faith negotiating and a willingness to compromise in the interest of both parties,” Kudlow said. “That’s what negotiation is supposed to be, not just hardline.”
Canada has not been part of the most recent discussions. Prime Minister Justin Trudeau previously said one of the sticking points is the inclusion of a five-year sunset clause, which would limit the lifespan of the agreement. Trump’s insistence of including that in the trade pact drew swift rebuke from Canada and Mexico. But according to Reuters, Mexico’s incoming trade negotiator told reporters in Washington that the U.S. had softened its stance on the so-called sunset clause. “It's going to come out,” Jesus Seade, designated chief negotiator of Mexico's next government, told reporters outside the U.S. Trade Representative's office on Saturday. “It's no longer what the United States was putting first in any way.”The decades-old trilateral trade agreement has been a frequent target of Trump, who has criticized large trade deficits the U.S. has with Mexico and Canada, as well as the relocation of American jobs and companies. U.S. goods and services trade with Canada totaled an estimated $544.9 billion in 2016, with a trade surplus of $11.2 billion.