NAFTA Renegotiation: US Offensive and Defensive Interests vis-à-vis Canada

Gary Clyde Hufbauer (PIIE) and Euijin Jung (PIIE)

Policy Brief
17-22
June 2017
Photo Credit: 
REUTERS/Christinne Muschi

Previous US administrations—whether Republican or Democrat—have focused on reducing barriers to trade and investment during trade negotiations, but the Trump administration will prioritize reducing the US trade deficit when it renegotiates the North American Free Trade Agreement (NAFTA). Trump will seek to lower Canadian barriers to US exports and oppose changes that would lower US barriers to Canadian exports. The authors identify well-known US and Canadian trade barriers and speculate on possible “blockbuster” demands that the Trump trade team might make on Canada in keeping with Trump’s concept of unfair trade (e.g., border tax adjustment, rules of origin, and currency undervaluation). NAFTA renegotiation gives the Trump administration an opportunity to resolve longstanding trade grievances with Canada, provided the United States makes its own concessions. Both countries can benefit from updating NAFTA to address issues not foreseen in the early 1990s, such as digital commerce and state-owned enterprises. But US insistence on “blockbuster” demands could put not only the talks but also the entire relationship between Ottawa and Washington at risk.