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Trump to advance trade deal with Mexico after NAFTA talks with Canada falter

President Trump on Aug. 31 acknowledged making a "strong" statement about Canada "off the record," calling the journalists that printed it "dishonorable." (Video: The Washington Post)

High-stakes trade negotiations between the White House and Canadian leaders unraveled Friday, a major setback in President Trump’s effort to redraw the North American Free Trade Agreement.

An impasse over prices for dairy products was further inflamed by private comments from Trump suggesting that he would refuse to offer Canada any concessions, placing in legal limbo his administration’s plans of reaching a new trade agreement with the United States’ neighbors.

After it became clear a deal was no longer in reach, Canadian Foreign Minister Chrystia Freeland said Friday afternoon that her government would not sign on to an agreement unless it was good for Canadians. “My job is to ensure this agreement works for Canadian workers, Canadian families and Canadian businesses,” she said.

The trade talks are to resume Wednesday, with U.S. and Canadian negotiators saying they would still seek consensus.

But Trump seemed willing to leave Canada out of a final deal to rework the regional trade pact, and replace the three-nation ­NAFTA with a bilateral trade agreement with Mexico.

“If we don’t make a deal on Canada, that’s fine,” Trump said Friday at an event in Charlotte.

Trump took a step in that direction later Friday, formally notifying Congress that he would enter into a trade agreement with Mexico. He stipulated in a letter that Canada could be added “if it is willing.”

Sending the letter to Congress begins a 90-day process for reworking the trade deal, a deadline the White House believes is necessary to get approval from the government in Mexico before President Enrique Peña Nieto leaves office Dec. 1.

But it is unclear whether a three-nation trade pact can be replaced under congressional rules with a two-nation agreement, and Trump needs Congress to sign off on any changes to NAFTA — a voting process that could take months or even years.

It is also unclear how the Mexican government will respond to Trump’s bid to cut Canada out
of the free-trade agreement, a ­quarter-century after the original NAFTA was signed. “The notification sent by the U.S. represents a step forward in the formalization of the understanding reached between Mexico and the U.S. in relation to NAFTA,” Mexican Economy Secretary Ildefonso Guajardo said in a statement. “Mexico will participate in the negotiation of trilateral issues, while continuing to promote an agreement to which Canada is a party.”

Reworking NAFTA is one of Trump’s primary economic and foreign policy goals. He has said the 1994 deal decimated much of the U.S. manufacturing industry, causing companies across the Midwest to close factories and move jobs to Mexico.

Trump reached an agreement with Mexican leaders on Monday on a smaller trade deal that he said could replace NAFTA, but a number of GOP lawmakers have made clear they will support changes only if Canada is involved.

Trump is expected to try to ratchet up economic pressure on Canada in the coming days to force Canadian Prime Minister Justin Trudeau to capitulate, a person briefed on the strategy said, speaking on the condition of anonymity to discuss sensitive deliberations.

Trump has imposed tariffs on steel and aluminum imports from Canada and other countries as a way to try to force trade concessions.

And he is strongly considering extending similar tariffs to all automobiles and auto parts sent from Canada to the United States to further strain Canada’s economy.

Trump’s letter to Congress capped a chaotic day of posturing and brinkmanship between the United States and one of its closest allies. The United States and Canada appeared to be within striking distance of a deal Thursday, but they could not agree on U.S. demands over dairy policy, and there were also differences about patent protections for ­pharmaceuticals, and over trade-
dispute resolution.

Canadian officials felt that the U.S. team was not willing to budge, a sentiment that appeared to be validated Friday morning when the Toronto Star published off-the-record comments Trump had made one day earlier to Bloomberg News.

Trump told Bloomberg journalists that negotiations to rework NAFTA would take place only on his terms.

Trump later confirmed making the comments, though he complained that they had not been intended for publication.

“Wow, I made OFF THE RECORD COMMENTS to Bloomberg concerning Canada, and this powerful understanding was BLATANTLY VIOLATED,” Trump wrote on Twitter. “Oh well, just more dishonest reporting. I am used to it. At least Canada knows where I stand!”

The Star quoted Trump as saying he was not going to offer Canada any concessions. But Trump said he could not admit this publicly because “it’s going to be so insulting they’re not going to be able to make a deal,” according to the Star’s account of his remarks.

“When we agree that something is off the record, we respect that,” Bloomberg said in a statement.

Freeland declined multiple times Friday to comment on Trump’s remarks.

When asked whether the United States was negotiating in “good faith,” Freeland paused for a moment before saying that U.S. Trade Representative Robert E. Lighthizer was “working really, really hard.” She did not mention Trump by name.

Canadian officials had previously expressed frustration that the White House was not willing to give any ground on a range of demands. Trump’s comments may have validated their fears and could make cutting a deal harder for Trudeau.

Some GOP lawmakers expressed hope Friday that all parties would ultimately reach an agreement, despite lingering differences.

“I hope they make the deadline, and I think they’re hard at work at it,” said Sen. Pat Roberts (R-Kan.). Of the long-standing tension between the United States and Canada, Roberts remarked, “Well, I think maybe that situation got off on the wrong foot.”

Trump has tried for months to pressure Trudeau into a series of trade concessions, badmouthing and mocking him in public and private a number of times this year.

Trump has called Trudeau “meek” and “mild.” Trudeau has responded to Trump by saying, “We will not be pushed around.”

Despite the bad blood, the United States and Canada have interwoven economies, with integrated supply chains and vast amounts of trade. The value of goods and services sold between the two countries last year reached $673.1 billion, making Canada the United States’ largest export market for goods.

Canada has responded angrily to Trump’s adversarial approach this year. Trudeau and his team imposed their own tariffs on U.S. goods in an attempt to counter the steel and aluminum tariffs Trump imposed on Canada, fueling concerns of a trade war.

Trump has long believed that NAFTA, enacted in 1994, incentivized U.S. companies to move jobs to lower-wage Mexico. But many business groups have said NAFTA actually helped the U.S., Mexican and Canadian economies to grow more broadly, even if it did lead to job losses in certain sectors as factories moved between countries.

Last year, Trump threatened to withdraw from NAFTA completely unless Mexico and Canada made major concessions, but he was talked out of it by business leaders and some of his closest advisers, including Agriculture Secretary Sonny Perdue.

During the 2016 presidential campaign, Trump focused his ire on Mexico, but he has spent much of the past year attacking Canada for what he has alleged is unfair government support for the Canadian dairy industry.

Three-nation talks moved slowly and then seemed to hit a wall in June after Trump made an early departure from the Group of Seven meeting in Canada and then made disparaging remarks about Trudeau.

This prompted White House officials to concentrate on negotiations with Mexico, a strategy that appeared to work as both countries announced on Monday that they had resolved most of their disagreements.

That gave Canada just a few days to reengage to meet the White House’s Friday deadline. Freeland rushed back from Europe and spent several days meeting with Lighthizer in Washington.

Each time talks with Canada have faltered, Trump has responded with personal attacks on Trudeau and with threats to rip up the existing economic relationship between the two countries. But Canadians have expressed less shock each time he has done this, seeming to become more familiar with his negotiating tactics.

But the exclusion from the talks rankled Canadians. Erin O’Toole, a Conservative member of Parliament who serves as his party’s official critic on foreign affairs, said in a statement late Friday that Canadians are “frustrated” and “want to know why Canada is on the outside looking in.”

Trudeau, meanwhile, faces difficult decisions of his own. If he decides to pull back from negotiations until the United States offers significant concessions, he could risk putting his country in a spiraling brawl with the unpredictable U.S. president. Even if a number of GOP lawmakers have vowed to preserve Canada’s status in the trade deal, Trump has shown no sign of bending to Congress’s will.

Selena Ross in Montreal, Erica Werner in Washington and Kevin Sieff in Mexico City contributed to this report.