August 29, 2017 9:17AM

What To Make of Trump’s NAFTA Termination Talk?

As the NAFTA renegotiation enters its second round this week-end, President Trump is bringing back talk of a possible NAFTA "termination." He tweeted this on Sunday: "We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?"  And at a press conference yesterday, he said the following: "I’ve talked about NAFTA, you’ve heard me many times -- and I’ve said that we will either terminate it or renegotiate it."

Recall that a few months ago, the White House seemed to be considering a withdrawal from NAFTA, but later backed off. Is the current termination threat anything new and different from what took place before? Is it just a pretty transparent attempt to gain negotiating leverage? As Trump himself said, "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." 

In theory, you can gain leverage in any negotiation by threatening to walk out. It's not clear how much credibility Trump's threat has, though. Two law professors have argued recently that the President does not have the legal authority to terminate NAFTA on his own, without a Congressional say (to be clear, there is a lot of uncertainty on this legal point). Aside from the law, such an action by President Trump would create a political battle between the White House and Congress that could upset the rest of Trump's agenda, so it may be unlikely.

At this stage, I'm not taking these termination threats by Trump very seriously. Most likely, it is a negotiating tactic, and I suspect the Canadian and Mexican governments have been following U.S. political events closely enough to realize this. If Trump eventually does push for terminating NAFTA, either to gain leverage or to try to unwind the deal, we can all start pushing back. But for now, it's better to focus on getting a positive outcome in the negotiations.