The Art of Breaking the Deal: What President Trump Can and Can't Do About NAFTA

20 Pages Posted: 7 Mar 2017

Date Written: January 25, 2017

Abstract

President-elect Trump has repeatedly said that he could tear up NAFTA. Can the president unilaterally cause the US to withdraw from NAFTA or must Congress agree? Congress must concur because the president and Congress have joint authority over trade agreements. However, unless Congress actively resists a presidential attempt to unilaterally withdraw from NAFTA, the US courts will not intervene, underscoring the importance to Canada of working closely with Congress. Further, the president has the power to frustrate NAFTA by taking various executive actions. While the sole power to impose duties under the US Constitution rests with Congress, Congress has delegated powers to the president to act unilaterally to address national emergencies and balance-of-payments and national security situations. These powers include the ability to raise tariffs and to adopt other border measures. The exercise of such powers could be very costly to the US economy and would doubtless provoke retaliation from US trading partners and litigation both in the US court system and before international bodies such as the WTO. While the president’s anti-NAFTA rhetoric has been directed at offshoring and balance of payments issues with Mexico, Canada is at risk of being sideswiped by aggressive anti-trade and anti-NAFTA measures that the president may adopt. Canada must be prepared to renegotiate NAFTA with the US administration, preferably on a trilateral basis that includes Mexico. However, the Canadian government must also exercise its rights under international trade agreements. The governments of Canada and Mexico need to secure support in Congress. Members of the House and Senate will be sensitive to damage to US businesses and job loss in their congressional districts and in their home states caused by the adoption of punitive trade measures.

Keywords: Trade and International Policy

JEL Classification: F13

Suggested Citation

Johnson, Jon, The Art of Breaking the Deal: What President Trump Can and Can't Do About NAFTA (January 25, 2017). C.D. Howe Institute Commentary 464. Available at SSRN: https://ssrn.com/abstract=2905944 or http://dx.doi.org/10.2139/ssrn.2905944

Jon Johnson (Contact Author)

C.D. Howe Institute

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

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