Trump told NAFTA exit risky

WASHINGTON -- When President Donald Trump met with six Republican senators last week to talk about trade, the lawmakers issued a stark warning: Implementing an unrestrained "America First" agenda -- such as withdrawing from the North American Free Trade Agreement -- would endanger stock prices that have soared since his election.

Just steps from the Oval Office, the president listened as GOP Sens. Cory Gardner of Colorado and Pat Roberts of Kansas depicted the potential fallout if Trump follows through on his threats to quit NAFTA.

The talks, which will resume later this month in Montreal, have been stalled over U.S. demands for significant concessions from Mexico and Canada. The impasse has prompted treaty proponents to search with growing urgency for any argument that might sway the president, leading to the new emphasis on finance.

On Wednesday, pro-NAFTA forces looked prescient when an errant wire service report that Canada thought a U.S. pullout was imminent erased more than $2 billion from General Motors' value in less than 90 minutes.

The Roosevelt Room meeting on Jan. 4 included trade advocate Gary Cohn, who left his Wall Street job at Goldman Sachs to head the National Economic Council, and U.S. Trade Representative Robert Lighthizer, who shares Trump's instinctive protectionism.

The two aides personify the tension between the record-setting bull market, which the president considers validation of his economic stewardship, and the tough trade measures that he has repeatedly promised his blue-collar supporters.

"The stock market is hitting one all-time record after another. ... Everybody happy with your 401(k)? Because if you're not, there's something very wrong," the president told an American Farm Bureau Federation audience in Nashville, Tenn., on Monday.

After the meeting, the White House said the president talked to the senators about seeking "more equitable trade deals with our partners, increasing exports and ensuring American industries are treated fairly around the globe." A spokesman from the trade representative's office declined to comment on the discussion, which was described by a former trade official who works for a pro-NAFTA farm group.

But the president's willingness to court a breakup of the 1994 treaty risks "serious market repercussions," said a business executive who is familiar with the internal administration debate and spoke on the condition of anonymity to discuss confidential talks.

A second executive, who also spoke on the condition of anonymity to discuss confidential deliberations, said treaty supporters are arguing that pulling out of NAFTA would neutralize the economic gains that the administration anticipates from the recent tax cut.

Last week's White House meeting was at least the second time the president had heard from NAFTA supporters about the financial fallout of withdrawing from the treaty. In early December, during a similar session with another group of senators, Sen. Joni Ernst, R-Iowa, showed Trump a chart demonstrating that his April threat to exit NAFTA caused pork futures to sink, according to a third executive briefed on the closed meeting.

NAFTA supporters hope that the warnings will resonate with a president who frequently boasts about lofty stock values.

Trump's enthusiasm for the market is matched by his decades-long demand that the United States reorient its trade policy to benefit American workers. Within days of taking office, the president withdrew the country from the Trans-Pacific Partnership, a 12-nation trade deal that was the centerpiece of President Barack Obama's Asia policy.

Since then, Trump's trade actions have paled in comparison to his tough campaign talk. On Tuesday, the White House announced that he will travel to Davos, Switzerland, this month for the annual World Economic Forum, an elite gathering regarded as the cradle of globalization.

But starting later this month, he is scheduled to decide several pending trade disputes that could reshape U.S. commercial ties with its largest trading partners. On Jan. 26, three days after the start of NAFTA renegotiations in Montreal, the president will face a deadline to announce whatever action he plans in a trade dispute involving Chinese-made solar panels.

But a NAFTA walkout would be a diplomatic bombshell with the potential to cause much greater market turmoil.

Although investors are braced for the president's trade announcements, most expect the United States to reach a deal with Mexico and Canada on a modernized accord, which would include new language on trade in digital services and perhaps changes in provisions governing the energy sector.

Business on 01/12/2018

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