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A Trade Deal with Trump Could Be Worse than No Deal

Tariff relief might come at the cost of Canadian jobs

The dancing around the Canada–United States–Mexico Agreement—USMCA, as I’ll call it here—became a tiny bit more frenetic last week due to statements from various US officials that the United States and Canada were close to a trade deal and a statement by Canadian prime minister Mark Carney that said, essentially, not so fast, and, by the way, don’t expect anything before the midterm election.

Some of this is no doubt pre-election wishful thinking on the US side. It would have been a pleasant October surprise to have a deal before the election, and, failing that, why not tell everyone there may be a deal and hope they remember that when they go to the polls, particularly in Maine and Michigan? Carney decided not to play that game, so realistically, not much has changed since talks officially broke down this past August. Informal talks continue, but agreement appears to be elusive. A similar, more formal dialogue is going on with Mexico. There are periodic announcements by all sides that agreement is close, but there remains no resolution. In both cases, relief from Section 232 tariffs, particularly on steel and aluminum, is a primary objective.

The ongoing back-and-forth, however, provides an opportunity to have a broader discussion of what kind of agreement the United States wants and what might make the most sense—two different things, as it turns out. Historically, agreements among the three countries have focused on market integration. The starting point—the US–Canada auto agreement in 1965—followed by a bilateral free trade agreement between the United States and Canada in 1988, the North American Free Trade Agreement (NAFTA) in 1994, and its successor USMCA in 2020 were each designed to promote trade and joint economic growth in all three countries. The theory was that greater market........

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