Trump may begin process of pulling U.S. out of NAFTA to pressure Canada, Mexico

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U.S. President Donald Trump is signalling that he might start the process of pulling his country out of the North American free-trade agreement as a way of pressuring Canada and Mexico to agree to concessions in the renegotiation of the deal.

In a highly unusual move, Mr. Trump appeared to spontaneously reveal this key part of his strategy for the ongoing NAFTA talks during an unrelated press conference Monday.

"I believe that you will probably have to at least start the termination process before a fair deal could be arrived at, because it's been a one-sided deal," the President told reporters at the White House. "And this includes Canada, by the way. Great respect for Canada, great love for Canada. But it's been a one-sided deal for Canada and for Mexico."

Explainer: Could Trump really pull the U.S. out of NAFTA?

Under Article 2205 of NAFTA, any country can withdraw after giving six months' notice. Triggering the process, however, would not necessarily lead to a pull-out: It would only give the United States the option of withdrawing after the six-month period elapsed.

Mr. Trump has previously threatened to tear up NAFTA, including twice in the past week alone. Observers debated whether he was serious about a pull-out or if it was purely a negotiating ploy to get Ottawa and Mexico City to agree to Washington's demands in the overhauled deal. The President's comments Monday seemed to confirm the latter interpretation.

But triggering 2205, even as a bluff, could still cause problems: Mexican President Enrique Pena Nieto told Mr. Trump earlier this year that he would not negotiate if the United States started the withdrawal process. And riling up the Mexican public could make it more difficult to get a deal.

The comments come just four days before the second round of NAFTA renegotiations start in Mexico City on Friday.

Mr. Trump seemed unconcerned about this dynamic Monday. He repeated his campaign promise that Mexico would pay for a wall along the U.S. southern border to stop the "tremendous drugs" that are "pouring into the United States at levels that nobody has ever seen before."

Jorge Guajardo, a former high-ranking Mexican diplomat, said in an earlier interview that the more pressure Mr. Trump exerts, the harder it will be for the Mexican government to make concessions without courting the wrath of voters. This is particularly true with an election next year, in which the ruling Institutional Revolutionary Party (PRI) will struggle to hold on to the presidency.

"This does nothing to soften Mexico; it puts Mexico in a tough position to offer anything. Any concessions from the Mexican government will weaken the PRI candidate," Mr. Guajardo said. He theorized that this may actually be Mr. Trump's intention: To push Mexico to abandon the talks.

The three countries are renegotiating NAFTA at the behest of Mr. Trump, who blames the deal for moving factory jobs out of the United States. Talks began with a five-day opening round in Washington earlier this month.

Although there are clear disagreements between the parties – Canada and Mexico have publicly rejected two of Mr. Trump's demands, to add a U.S. content requirement to cars and trucks and to scrap the Chapter 19 dispute-settlement mechanism – the discussions are in an early phase.

Sources with knowledge of the talks said things were cordial behind closed doors. In public, however, Mr. Trump has repeatedly threatened to quit the deal. He tweeted Sunday that Canada and Mexico were "being very difficult" in negotiations.

Prime Minister Justin Trudeau shrugged off the President's bombast earlier Monday, telling reporters: "We have heard such comments before."

Robert Holleyman, a former U.S. trade official, predicted Mr. Trump's threats of withdrawal would not have much effect. That's because, when he first mused about triggering Article 2205 in April, the U.S.'s trade-dependent agriculture industry, Congress and some members of cabinet promptly pushed back and convinced him not to.

"Trump may threaten this or potentially even signal withdrawal but Canada and Mexico know and have already seen that the price he'd have to pay for that would be steep and costly to interests Trump and Republican members of Congress care about," Mr. Holleyman told The Globe and Mail.

- With a file from Reuters