US keeps the heat on in NAFTA negotiations

The NAFTA negotiations appeared to be winding down quietly since there was no longer enough time left for the US Congress to pass legislation before the end of this year. But President Donald Trump sparked a renewal of tensions this week with his announcement that he wanted to launch a so-called Section 232 investigation into whether tariffs should be levied on autos imports for national security reasons. The new investigation into motor vehicle trade won’t be completed for at least six and probably nearer 12 months. Tariffs can only be levied after that report is submitted, so this is not a short-term threat. Moreover, imposing tariffs on vehicles on national security grounds would clearly make little sense and would prompt WTO and NAFTA arbitration complaints. US vehicle manufacturers will presumably lobby hard against them too. Our guess is that this isn’t a very credible threat.