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Illustration: Lazaro Gamio / Axios

It's hard to overstate how concerned free-traders on Capitol Hill are about the current state of the Trump administration's negotiations on two consequential trade deals: the North American Free Trade Agreement (NAFTA) and the U.S.-Korean trade deal (KORUS.)

"We're all on collapse-watch," one knowledgable source told me. Capitol Hill aides who work on trade are asking "when" not "if" Trump sends a withdrawal notice for NAFTA.

Trump's top trade negotiator, Robert Lighthizer, is playing such extreme hardball with the Canadians and Mexicans in his NAFTA negotiations, that sources close to the process say there's no chance of a compromise solution unless he changes tactics.

  • The uncompromising message: Trump wants what he wants. In this latest NAFTA round he's demanding things the Canadians and Mexicans simply won't accept‚ including 50 percent American-made parts in cars crossing the border tariff-free and a "sunset" clause that would force the trade deal to be reassessed every five years. (A Lighthizer spokeswoman declined to comment when asked about this.)
  • Washington's pro-trade community isn't feeling any more cheerful about the Korean talks. Trump believes to his core that the deal is a scam.

Administration sources don't deny Trump and Lighthizer have been discussing the six-month withdrawal notice, and other methods of gaining leverage over their negotiating partners. But they caution us that just because Trump often discusses withdrawing from these deals — and sometimes with burning urgency in Oval Office meetings — that doesn't mean he's nanoseconds away from doing so.

  • Trump will likely only send the NAFTA withdrawal notice when he feels the negotiations are in their final stage. They're not there yet.
  • And Trump's top economic adviser Gary Cohn has told the president that withdrawing from NAFTA while he's trying to pass tax reform would be a terrible idea. It would cause a riot on Capitol Hill and alienate Republicans whose votes they desperately need.

Why this matters: Between NAFTA and KORUS you're talking more than $1 trillion in annual trade in goods and services. Withdrawal would do far more than simply roil the U.S. markets; it would profoundly alter U.S. alliances, test a crucial national security partnership in Asia, and could result in the election of a hard core leftist (and no friend to the USA) in Mexico.

  • Ian Bremmer, president of the Eurasia Group, told me that pulling out of TPP, and now potentially NAFTA, "is a direct strategic hit to the U.S. in the area we are most vulnerable: determining economic standards for the world going forward ... Our allies in Asia and Latin America have a choice (in a way that they don't militarily) — China.
  • "In both cases, our allies have expended a great deal of domestic political capital because they believed the U.S. could be relied on to follow through on our international commitments. When that turns out not to be true it causes serious long-term damage to the relationships."

The big picture: A former longtime Hill aide emailed after Trump's Iran speech with the subject line "deal breaker in chief?" ... "Despite claiming to be a great deal maker, I can't think of a single deal President Trump has concluded," he writes. Trump has exited deals (Paris and TPP); chipped away at them (Iran); and unilaterally signed a lot of EOs. "He has endorsed bills (like ACA repeal) or outlines (like tax reform) without himself negotiating details. And he suggested a Chuck & Nancy deal on DACA, but pulled back as soon as it was criticized."

  • "I'm looking for something he bargained," the former aide continues, "where he got less than his 100% position, to see how he could defend a less than perfect deal."

What's next? The next couple months will be crucial because Trump's patience — and Lighthizer's uncompromising asks — have struck immovable objects in Mexico, Canada, and South Korea. Something's gotta give.

Go deeper

Mike Allen, author of AM
4 hours ago - World

Courage vs. coddling with China

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The women's professional tennis tour suspended tournaments in China Wednesday out of concern for Peng Shuai, on the same day that a top business voice made excuses for Beijing.

Why it matters: Ahead of February's Winter Olympics in Beijing, some sports figures are taking on the regime — while Big Business shrinks from confrontation with the world's second-largest economy.

5 hours ago - Sports

What to know about the first MLB lockout since 1995

Illustration: Shoshana Gordon/Axios

Hope you enjoyed the recent flurry of free-agent activity, because it's likely the last non-lockout-related MLB news for a while.

Driving the news: The owners locked out the players after the collective bargaining agreement expired at midnight last night, leading to MLB's ninth work stoppage — and first since 1995.

Biden extends mask mandates for travelers into 2022

President Biden delivers remarks at the White House on Dec. 1. Photo: Anna Moneymaker via Getty Images

President Biden will announce new testing protocols for international travelers on Thursday and extend masking requirements through March as the U.S. prepares to fight the Omicron variant this winter, according to senior administration officials.

Driving the news: The U.S. will tighten pre-departure testing protocols starting early next week by requiring all inbound international travelers to take COVID-19 tests within one day of their departure rather than three.

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