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Mexico shrugs off Trump threats to scrap NAFTA

President Trump gives a thumbs up to supporters at the Phoenix Convention Center during a rally on Tuesday. (Ralph Freso/Getty Images)

MEXICO CITY — One week into talks to renegotiate NAFTA, President Trump lobbed another grenade over his so-far-imaginary Mexico border wall, telling a rally in Phoenix on Tuesday night that “I don't think we can make a deal.”

Trump's argument was a familiar one, that the United States has been “so badly taken advantage of” by “one of the worst deals” that “we'll end up probably terminating NAFTA at some point.”

Mexico's public reaction to what would be a massive economic development — if followed through on — was essentially a yawn. Foreign Minister Luis Videgaray brushed off Trump's comments as simply a negotiating tactic that should not surprise or frighten Mexico.

“He's negotiating in his own particular style,” Videgaray told a local TV station.

Trump administration unveils goals in renegotiating NAFTA

Trump's threats to walk away from the 23-year-old free-trade agreement with Mexico and Canada have been made several times before, as part of his objection to the $60 billion trade deficit with Mexico and a loss of manufacturing jobs from parts of the United States. In a phone call with President Enrique Peña Nieto in January, Trump talked about imposing a border tax of up to 35 percent on Mexican exports. During the Group of 20 meeting in Hamburg last month, Trump again reiterated his frustration with NAFTA, according to a Mexican official informed about the meeting between the two leaders.

“We're all very clear that this is the worst deal in the history of the U.S.," the official, speaking on the condition of anonymity to be candid, said with a touch of exasperation.

The U.S. is demanding sweeping changes to the North America Free Trade Agreement, saying it needs a major overhaul. (Video: Reuters)

Despite all those warnings, many Mexican business and political leaders remain upbeat about the chances of a deal, including one that might boost trade on both sides of the border and modernize an agreement made in the early 1990s, before the e-commerce age took off.

Juan Pablo Castañon, president of Mexico’s Business Coordinating Council, a coalition of business groups, recently predicted that there was a 90 percent chance of success.

“This is a great opportunity to strengthen the North American region,” said Manuel Herrera, president of the Confederation of Industrial Chambers (Concamin) and a member of an advisory body to the trade negotiators. “We can become even more competitive as a region.”

Trump urged Mexican president to end his public defiance on border wall, transcript reveals

And yet, many Mexicans acknowledge that risks remain and are wary that the Trump administration could impose unacceptable demands that could hurt booming industries such as auto manufacturing.

“We’ve opened up a huge negotiation process of one of the world’s most ambitious trade agreements on the back of very anti-Mexican” rhetoric from Trump, said the Mexican official, who spoke on the condition of anonymity. “The whole thing is full of not only potholes, but mines, that could derail it at any time.”

President Trump held a rally in Cedar Rapids, Iowa, on June 21 and discussed his decision to stay in NAFTA. (Video: The Washington Post, Photo: SCOTT MORGAN/The Washington Post)

One risk is that negotiations could drag on into next year, when Mexico has a presidential election, and the trade talks would get swept up into a more volatile political environment or a new administration that might be less inclined to deal with Trump.

“I believe the very short window of opportunity will be the first quarter of next year, at a maximum,” said Larry Rubin, a Republican Party representative here and president of the American Society of Mexico. Rubin said a deal was still in the best interest of all three countries. “I'm sure they will get to an agreement,” he said.

Even if the upheaval of Trump’s threats to scrap NAFTA amounts to nothing but a slightly tweaked agreement, Mexicans have been made well aware of the risks of relying too heavily on the United States during this period of uncertainty. The feverish effort underway to diversify the Mexican economy and boost trade with parts of South America, Europe and Asia is likely to continue regardless of how NAFTA shakes out. And that could mean fewer trade benefits for the United States, said Benjamin Gedan, who was National Security Council director for Latin America during the Obama administration.

“That is a price we will pay for a generation,” said Gedan, a scholar at the Woodrow Wilson Center in Washington.

The next round of NAFTA talks is scheduled for next month in Mexico City.