Former Trump Official: Trump Skeptical of USMCA's Value

Stephen Vaughn, a former general counsel in the Office of the U.S. Trade Representative, told an audience Oct. 7 convened by the Washington International Trade Association, "I think that it's important for everybody to understand the president's always been skeptical of these type of deals."

As a result, Vaughn said, "I think it's going to be a very challenging negotiation," and that there will be "pretty comprehensive" asks the U.S. will have of Mexico and Canada.

Panelist Brian Pomper, who was chief trade counsel on the Senate Finance Committee when Sen. Max Baucus, D-Mont., was the chairman, agreed.

"My understanding is the president has, in some respects, kind of soured on really what was his project, USMCA, because I think he was hoping or had thought that it would reduce the trade deficit with Mexico in particular, and I believe the trade deficit has gotten worse in the period since USMCA passed. And I think that has made a big impression on him, and [is] part of the reason why it may be difficult to convince him."

Panelist Peter Harrell, who co-led President Joe Biden's supply chain resiliency program in his role as White House senior director for international economics, said he thinks the U.S. may still be open to tariff-free trade with Mexico and Canada if they increase their barriers to Chinese imports and investments.

"You hear [USTR Jamieson] Greer talk about Fortress North America," Harrell said. "That strikes me as one model that is clearly under consideration from the U.S. perspective for this renegotiation."

Both he and Pomper said that the U.S. will try to work through irritants, such as dairy and lumber with Canada, ahead of the official review period.

The panel also talked about what might happen if the tariffs levied under the International Emergency Economic Powers Act, or IEEPA, are either struck down or partially struck down.

Vaughn said that in the first Trump administration, Congress pushed back on Trump's efforts to increase protection for domestic industry, and there was talk of legislating to rein in Section 232 national security tariffs. That has evaporated this time, he noted, and the president's stronger political position has given him the room to be more aggressive in hiking tariffs.

"IEEPA gave him a tool that really allowed him to do things in a much closer, I think, to the way he wanted to do it all along, which is to come in with initial tariff proposals, and then calibrate those proposals depending on what he was seeing in terms of market reactions and also what he was seeing in terms of other countries' responses, and also what he was seeing in terms of the political effects of those measures. And so you've seen this kind of very iterative process throughout the year, where the president makes announcements, and then tweaks those announcements in response to the facts on the ground.

"And I think inside the administration there's a very strong feeling that this has been, you know, extremely effective -- that they were able to get a deal with the EU, they were able to get a deal with Japan, they were able to get a deal with Korea."

Vaughn said the case in front of the Supreme Court is a close one, and that many in the administration think they will win. If that happens, things continue as they have been.

"I think if the president does not have this full authority under IEEPA, I do think we'll have a much more robust conversation about: Does the president need more authority? Should he go back to Congress, and what would that look like if that's something that he chooses to do?"

He said if he does go to Congress after a loss, he doesn't think Congress will be ready to give him the ability to hike tariffs with no public process and with no built-in time limit, which is how he has used IEEPA. (Congress could end the tariffs by terminating the emergencies, but it would take a veto-proof majority in both chambers.)

"I do not think that he's going to get that same type of authority again," Vaughn said.

Still, he said, people shouldn't assume that just because the president is making deals that don't require a vote in Congress, that means that Congress has no voice.

"I just don't think any president is really going to be able to maintain a trade policy in opposition to real frustration and opposition from the Congress," he said. However, the majority view in Congress right now is, "We're willing to give this a chance."

All the panelists agreed that the administration would try to replicate current levels of tariffs through other legislative tools, although some may take longer or also face legal challenges.

Pomper said, "Regardless, the president does have tools. I expect that the [tariff] landscape will look relatively similar as it does today, and I think the foreign countries who have been our counterparties in these negotiations are well aware of that. And so I think they probably will want to keep their agreements in place the way that they are."

Harrell agreed, though said some implementation of concessions might be slow-walked.