Days ahead of a G-7 meeting this weekend in Quebec, many analysts say the U.S. is in an open trade war with its most steadfast allies.
Be smart: President Trump still appears to be winging it, throwing out one extreme idea after another. His latest threat — to do away with NAFTA — may merely be his maximalist negotiating strategy at work. No one — perhaps not even Trump himself — knows.
Why it matters: The EU, Mexico and Canada appear to be drawing a hard line in the sand, creating an atmosphere of brinksmanship. And, that comes on top of Trump's rising conflict with China over trade.
- The EU today slapped tariffs on $3.4 billion in U.S. exports of peanut butter, boats and Harleys, aimed at congressional leaders' districts.
- Canada is targeting $12.8 billion in pens, orange juice, maple syrup, mattresses and toilet paper, also aimed at powerful congressman.
- Yesterday, Mexico imposed tariffs on $3 billion of U.S. pork, cheese and steel, aimed at farmers.
"An open trade war has finally erupted in the backyard of the U.S., with potentially dire repercussions for the survival of NAFTA," Eswar Prasad, a Cornell University professor, tells the FT.
Quick take: Until now, this has been a one-way war declared by Trump, who for decades has railed against the supposed negotiating incompetence of U.S. trade officials. Now, as president, he has lurched from crisis to impasse, and yesterday threatened to tear up the quarter-century-old NAFTA treaty, saying that he prefers to negotiate separately with Mexico and Canada. Both U.S. neighbors rejected the idea.
The data are not aiding Trump's case:
- The Commerce Department today reported that the U.S. trade deficit fell to a seven-month low in April, to $46.2 billion, reports Reuters' Lucia Mutikani.
- In addition, Commerce revised the March numbers to a lower figure than previously reported — $47.2 billion, down from $49 billion.
Bill Reinsch, at the Center for Strategic and International Studies, tells Axios that Canada and Mexico will maintain a united front against Trump. He said:
"Remember the Benjamin Franklin quote: 'We must all hang together or most assuredly we will all hang separately.'”
Go deeper: Read the whole post.