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Uncertainty surrounds White House agreements on trade with China, North America

Freshly harvested oranges are delivered to a plant in Florida in 2016. Sen. Marco Rubio (R-Fla.) expressed concern that the new North America trade pact would harm the state’s agriculture.
Freshly harvested oranges are delivered to a plant in Florida in 2016. Sen. Marco Rubio (R-Fla.) expressed concern that the new North America trade pact would harm the state’s agriculture. (Luke Sharrett/Bloomberg News)

President Trump’s aggressive trade strategy accelerated on two fronts Monday, with the White House pressing China to quickly follow through on commitments made over the weekend while simultaneously clashing with lawmakers over a fragile North America pact.

On Monday, White House National Economic Council Director Larry Kudlow said Trump was expecting immediate concessions from China as part of a broad package of changes both countries agreed to pursue during the Group of 20 summit in Argentina.

At the same time, Trump’s updated North America trade proposal was encountering a rough reception on Capitol Hill, where both parties have deep divisions over trade that will be on full display as a newly Democratic-controlled House takes up the pact along with the Republican-led Senate.

Both discussions, driven largely by Trump and U.S. Trade Representative Robert E. Lighthizer, are at the center of the White House’s agenda and could have profound implications for the global economy if negotiations collapse.

At the same time, they are also fraught with confusion and ambiguity, complicating urgent timelines set by Trump. The White House’s description of its agreement with China changed Monday, and a prominent lawmaker predicted that Congress would block the North America deal.

“Each negotiation creates huge uncertainty over the next three to six months,” said David Dollar, who served as the Treasury Department’s top financial emissary to China during the Obama administration. He said how the separate talks are “resolved is going to have a big impact on the economy over the next two years.”

White House and Chinese officials have described the terms of the agreement reached Saturday much differently, and some of the goals appear unclear.

Trump, for example, wrote in a Twitter post Sunday night that China had agreed to “reduce and remove” all tariffs on U.S. auto imports, a change that could have major implications for American companies shipping cars overseas.

China recently imposed a 40 percent tariff on U.S. autos in retaliation for separate tariffs Trump imposed on Chinese goods. Previously, the tariff was 15 percent.

Kudlow, speaking to reporters, was a bit more circumspect about what China said it would do.

“We don’t yet have a specific agreement on that, but I will just tell you, as an involved participant, we expect those tariffs to go to zero,” he said.

Such a step could be complicated and could require China to remove tariffs on auto imports from any country to comply with global trade rules.

Trump agreed to suspend the imposition of new tariffs on Chinese goods for 90 days while both sides negotiate. Kudlow said China’s vice premier, Liu He, had given him assurances that Beijing would begin making changes immediately to allow more U.S. companies to sell products into China.

“I think this is just an enormous, enormous event,” Kudlow said of the blueprint agreement. “Enormous event, and I know we’ve been down this road with China in the past, and we’ve been quite disappointed with the lack of results.”

Meanwhile, on Capitol Hill, lawmakers must approve the new trade agreement with Mexico and Canada that Trump signed along with leaders of those two countries Friday, replacing the North American Free Trade Agreement from 1994.

The outcome is uncertain because of labor, agricultural, manufacturing and environmental concerns raised by a number of lawmakers.

Sen. Patrick J. Toomey (R-Pa.), a prominent free-trade advocate, said in an interview that he could not support the agreement as drafted because he believes it would diminish trade across the continent. He cited concerns about a provision that might lead to the deal expiring, and new rules he said would limit Mexico’s ability to sell cars and auto parts.

At the same time, Toomey said Democrats who will take control of the House next year are trying to push the pact in an even more protectionist direction.

“I don’t see how they get this ratified by Congress,” Toomey said.

Democrats are insisting that the trade deal be reopened to strengthen provisions aimed at limiting companies’ ability to move U.S. jobs to Mexico. Administration officials have rejected the idea of making any changes to the proposed pact, saying it would upend the formal approval process.

But aides to Sen. Sherrod Brown (D-Ohio), a leader on the issue, argued that there is precedent for reopening the agreement and making changes at this stage. And some Democrats said the administration may have no choice if it wants to get the deal through the Democratic House.

“You’ve got to do something in the [new trade deal] to show me that American workers are not going to continue being taken advantage of, particularly in the area of wages,” said Rep. Bill Pascrell Jr. (N.J.), the top Democrat on the Ways and Means trade subcommittee.

Some lawmakers could threaten to block the deal as a way to receive side agreements addressing home state priorities, a tack that has been used before with success.

In an attempt to blunt such maneuvering, Trump on Saturday said he would move to terminate the existing agreement soon — so Congress would be forced to choose between the new deal or no pact.

“We’re rolling,” Kudlow said. “Congress, on the other hand, is not rolling. And I think President Trump’s intent here was to light a fire under Congress.”

Lawmakers disagree about whether the president has the ability to withdraw unilaterally from NAFTA, but a number of lawmakers insist he doesn’t, and some Democrats scoffed at the threat.

Some Republicans, however, said such a threat from Trump could serve as a powerful incentive to get Congress to go along with the deal.

“If he submits it to Congress and that very same day says, ‘In 60 days I’m pulling out of NAFTA,’ and you have no agreement that lowers tariffs, and go back to what the law was before 1993, it seems to me that it’s going to force Congress to act, even if you disagree with parts of it,” Sen. Charles E. Grassley (R-Iowa) said Monday on the radio show “Adams on Agriculture.”

“Now that’s a hard-nosed approach, but sometimes the president has to use that if he wants to get things accomplished,” said Grassley, who is in line next year to chair the Senate Finance Committee, which will hold hearings on the pact.

More than any other issue, Trump’s trade policies have divided him from the traditionally free-trade Republican Party. Republicans generally support NAFTA and feared that Trump would make good on his threats to cancel it. For some of them, the signing of the new deal, the USMCA, came as a relief because it stops short of more severe disruptions Trump had originally sought.

Many Democrats oppose ­NAFTA, blaming it for driving U.S. jobs overseas and gutting industrial regions in the Midwest that Trump won in 2016 by appealing to workers who felt forgotten. House Democrats have been unwilling to back sweeping trade agreements in recent years, even bucking a president of their own party, Barack Obama, when he sought a trade measure in 2015.

Democratic leader Nancy Pelosi (Calif.) said she is not yet ready to judge the new trade deal but was dismissive of it.

“Whatever they’re calling it now, it has some kind of gobbledygook name — the trade agreement formerly known as Prince, no, I mean, formerly known as NAFTA — is a work in progress,” Pelosi remarked Friday

Like other Democrats, Pelosi praised Lighthizer for working with Democrats and updating them on the status of talks, a relationship that could prove crucial as votes near.

“But what isn’t in it yet is enough enforcement reassurances regarding provisions that relate to workers and to the environment,” she said.

The three-country signing of the trade deal Friday kicked off an intricate set of timelines under “fast-track” rules that allow the pact to pass the House and Senate with simple majority votes and without amendments.

The administration must submit paperwork to Capitol Hill, and within 105 days an economic impact report is due from the International Trade Commission. Hearings will be held in the House and the Senate, and once the administration submits the final legal text and an implementing bill, the Ways and Means Committee must vote on it within 45 legislative days, followed by votes in the full House, the Senate Finance Committee and the Senate.

Despite cautious support from some Republicans, there are early signs of lawmakers using the high-stakes deal to demand that home state issues be addressed.

Sen. Marco Rubio (R-Fla.) said on Twitter that the deal as drafted “will put Florida seasonal vegetable growers out of business” by allowing Mexico to dump subsidized produce in the United States.

Rubio’s office said Monday that the senator had asked Lighthizer to look into additional trade actions to protect Florida growers, and that Lighthizer had committed to requesting a fact-finding investigation and taking corrective action.