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Lawmakers, business groups warn new tariffs could derail new NAFTA

Lawmakers and business groups are sounding the alarm that President Trump’s latest tariff threat could put the new North American Free Trade Agreement at risk.

Trump says he will impose 5% tariffs on all goods coming into the United States from Mexico beginning June 10, unless Mexico acts to stop the flow of migrants at the southern border. The tariffs would increase monthly.

“Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent. Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country,” said Senate Finance Chairman Chuck Grassley (R-IA).

The White House announced the plan on the same day the Trump administration submitted the draft Statement of Administrative Action to Congress – a procedural step toward ratifying the new NAFTA, known as the USMCA. Canada and Mexico also began the process of considering ratification this week.

Senate Republicans, including Grassley, had praised the president for removing the tariffs on steel and aluminum from Canada and Mexico earlier this month. Lifting the metal tariffs was seen as clearing the way for lawmakers to approve the USMCA, but a new trade dispute with Mexico will likely complicate matters once again.

“Certainly these latest actions maybe — finish this off. Not in the long term, I don’t think the USMCA is finished off,” said Chris Wilson, deputy director of the Wilson Center’s Mexico Institute, in an interview with Yahoo Finance. “But the short term, possibility of getting a deal this summer seems to be disappearing very quickly.”

The USMCA is ‘completely separate’

On a call with reporters, White House Chief of Staff Mick Mulvaney argued the two issues aren’t linked.

“These are not tariffs as part of a trade dispute. These are tariffs as part of an immigration problem. The USMCA is a trade matter and completely separate,” Mulvaney said.

White House Press Secretary Sarah Sanders defended the administration’s decision, saying lawmakers should move forward to ratify the deal.

“They should go through with that because it’s good for American workers and it’s good policy,” said Sanders. “It’s a great deal and it’s something that we should move forward with. Frankly, we should be able to solve these other problems as well. And we’re hopeful that we will.”

WASHINGTON, DC - MAY 31: White House press secretary Sarah Sanders answers questions at the White House May 31, 2019 in Washington, DC. Sanders responded primarily to questions about potential tariffs with Mexico announced by U.S. President Donald Trump last night via Twitter. (Photo by Win McNamee/Getty Images)

Rep. Kevin Brady (R-TX), the top Republican on the House Ways and Means Committee – which has authority over trade issues – stopped short of criticizing the President’s decision, but said “resolving the issue positively will be essential to the passage of the new USMCA.”

“Mexico is a valued ally and the new tariffs are not yet in effect, so there is a window here for both countries to find common ground. It is in both of our interests to do so, economically and for stronger security,” Brady said.

Business and trade groups also warned against the sweeping tariffs.

“Manufacturers have been working hard to secure passage of the U.S.–Mexico–Canada Agreement, and the last thing we want to do is put that landmark deal—and the 2 million manufacturing jobs that depend on North American trade—in jeopardy,” said Jay Timmons, the CEO of the National Association of Manufacturers.

The U.S. Chamber of Commerce called new tariffs “exactly the wrong move.”

“It completely contradicts the spirit of NAFTA, not to mention the USMCA that we’re attempting to ratify. Mexico is our friend and neighbor, a partner in trade and security. The president’s announcement is baffling and, if carried out, will be terribly damaging,” said Glenn Hamer, the Arizona Chamber of Commerce and Industry CEO.

The Business Roundtable agreed moving forward with new tariffs put the trade deal at risk and “undermine duty-free North American trade that supports over 12 million American jobs,” the group said in a statement.

‘The work will be derailed’

Even opponents of the USMCA – as the deal stands now – blasted the president for his decision.

“By announcing that he would arbitrarily slap trade sanctions on Mexico over immigration issues, President Trump has potentially derailed progress on a new NAFTA deal that could stop the ongoing outsourcing of American jobs,” said Rep. Rosa DeLauro (D-CT).

DeLauro and Democratic lawmakers have been working with Ambassador Lighthizer to address concerns about labor, environmental, pharmaceutical and enforcement measures in the trade deal. She said the new tariffs risk “blowing up over a year of work.”

“This work will be derailed, and NAFTA’s damage will continue,” said DeLauro.

The top Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-OR), said the president has “no credibility when it comes to America’s national security and no coherent plan when it comes to trade.”

“The tariffs he's proposing are paid by American consumers, and the retaliation we should expect from Mexico will harm American workers,” Wyden added.

Mexican officials plan to discuss the new tariffs with Trump administration officials in Washington.

In a tweet, Mexico’s foreign minister called the tariff threat “unfair” and said it made “no economic sense.”

Mexico and the United States have 10 days to come to an agreement and avoid the tariffs, but it’s not clear what exactly it would take to satisfy Trump.

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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