trending Market Intelligence /marketintelligence/en/news-insights/trending/4nxjp5f8u639_ep6igvxzq2 content esgSubNav
In This List

US approach to trade talks may reflect White House divisions

Blog

Using ESG Analysis to Support a Sustainable Future

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook


US approach to trade talks may reflect White House divisions

White House advisers are reportedly divided between free-trade advocates and those who favor the use of tariffs and other hard-line measures, a rift that may hinder progress on already difficult and glacially slow negotiations with both friends and rivals.

The latest evidence came with the June 5 revelation by National Economic Council Director Lawrence Kudlow that the U.S. will pursue separate, bilateral talks on an overhaul of the North American Free Trade Agreement while at the same time attempting to preserve the multilateral pact.

"[President Donald Trump's] preference now — and he asked me to convey this — is to actually negotiate with Mexico and Canada separately," Kudlow said in an interview with Fox News. "He prefers bilateral negotiations." Kudlow added that Trump "is not going to leave NAFTA," but that, "he's just going to try a different approach."

Kudlow's comments, seemingly laying bare the incompatible objectives pursued by the different White House factions, come as tariffs on steel and aluminum have led to tensions between the U.S. and allies Canada, Mexico and the European Union, and created a potentially dangerous standoff with China a huge economic competitor.

The NAFTA talks, now more than nine months old, have been particularly difficult. "NAFTA has kind of dragged on," Kudlow said.

Despite the slow progress, NAFTA's structure makes it difficult for the administration to work with Mexico and Canada individually, according to Michael Pearce, senior U.S. economist at Capital Economics.

"It doesn't make sense," he said. "Any agreement would need to be a trilateral agreement" even though some of the biggest disagreements in the renegotiation have been between Mexico and the U.S. over the automobile industry and Canada and the U.S. on agriculture.

The same dynamic has affected the administration's dealings with China. The delegation that went to Beijing in May had different notions of how to conduct the talks and whether an exchange of retaliatory tariffs would be beneficial. The division raised concerns among business leaders, according to The New York Times.

"Instead of a single point person with a clear set of demands, the White House is sending six trade and economic officials with differing ideas on how to approach China and who are deeply divided over the desirability of a trade war," the Times reported May 2. "Some advocate goals that do not align with what the American business community wants or what China is prepared to offer, raising questions about how productive a dialogue will be, and whether talks can prevent the world’s two largest economies from tipping into a deeper conflict."

Talks at the beginning of June led by Commerce Secretary Wilbur Ross did not appear to offer any immediate victories for the U.S., based on a readout from the administration on the meetings.

"The meetings focused on reducing the United States' trade deficit by facilitating the supply of agricultural and energy products to meet China's growing consumption needs, which will help support growth and employment in the United States. The United States officials conveyed President Donald J. Trump's clear goal for achieving a fair trading relationship with China," the statement reads. "The delegations will now report back to receive guidance on the path forward."

Reporting from The Wall Street Journal indicates China offered to purchase nearly $70 billion of U.S. farm and energy products as long as the administration abandons the tariffs it has threatened, while Trump has pressured China to reduce the $375 billion U.S. merchandise trade deficit with China by $200 billion. The White House said it plans to announce tariffs shortly after June 15.