The North American Free Trade Agreement (NAFTA) is on the verge of being officially scrapped as Donald Trump happily announced that the US and Mexico have reached a new trade deal that will not be called NAFTA as Trump indicated that the name of the 1994 Clinton era deal holds only negative connotations. Hailing the deal as the The United States-Mexico Trade Agreement (note the absence of the word “free”), Trump said that he awaits Canada entering into a similar agreement while warning that if Ottawa rejects his terms the US will impose a new tariff on cars manufactured in Canada.
The optics of the new deal with Mexico bode well for Trump as during the campaign he earned a reputation as someone with a distaste for Mexican culture. Now, with Mexico becoming the first country in the world to reach an amicable agreement to end one front of Trump’s global trade war, Mexico-US cooperation seems to be not only back on track but in a reinvigorated state.
While Mexico runs a trade surplus with the United States, the Mexican economy is highly dependant on the United States as a market for exports. Because of this, refusing to agree with the revised terms of a new trade deal, Trump could have and by all accounts would have cut Mexico off from the US market in such a way that it could have singlehandedly plunged Mexico into a deep recession as unlike China and other powerful east Asian economies, Mexico has little leverage in the kind of trade war Trump is waging throughout the world. Therefore, lameduck President Enrique Peña Nieto did what virtually anyone in his position would have done – accepted the reality that Trump was going to kill off NAFTA one way or another and that it was more pragmatic to accept a revised trade deal than the fight a losing battle and wind up with no deal at all.
Of course, also party to discussions was Mexican President Elect Andrés Manuel López Obrador, known affectionately as AMLO. This is the case because of Mexico’s unusually long period between elections and the inauguration of the new President. While AMLO’s leftest/populist politics are a far cry from the neo-liberalism of Nieto, AMLO has been a long time critic of NAFTA arguing that it deprives opportunities to Mexican farmers by allowing for the importation of US foodstuffs from large industrial farms that can out-mass produces smaller Mexican agriculturalists. AMLO consequently welcomed the revised trading deal, particularly where Mexico’s energy markets are concerned. AMLO further welcomed Trump’s positive and respectful attitude which comes as a surprise for some as during his campaign AMLO played heavily on the fact that Trump allegedly does not like nor respect Mexicans.
With Trump describing his soon to be Mexican counterpart as “terrific” (a well known compliment in Trump’s vernacular), it would appear that if anything Mexico-US relations will continue to improve once AMLO is officially inaugurated in October. Just prior to AMLO’s universally expected election victory I wrote the following about how a candidate who filled football stadiums where thousands came to here AMLO’s decidedly anti-Trump rhetoric, might actually come to be a close working partner with his US counterpart:
“Throughout the campaign, AMLO filled town squares and football stadiums with supporters who have clung to his anti-corruption, anti-oligarchic, anti-Trump and anti-crime message more readily than in previous years. Where AMLO continues to be portrayed as a dangerous maverick by establishment parties and politicians with many likening him to a Mexican version of Venezuela’s revolutionary President Hugo Chavez, the comparisons seem to have backfired as the status-quo of neo-liberal Mexican leaders is being held increasingly responsible for the country’s crime epidemic, narco-gangster epidemic and a stagnating economy in which wealth is widely viewed to be distributed unevenly and unfairly.
While AMLO’s anticipated victory would have likely been assured even without the appearance of Donald Trump as President north of the infamous border, AMLO’s leftist populism serves as the perfect contrast to Donald Trump’s specifically anti-Mexico conservative populism.
But while AMLO has been a passionate opponent of Trump’s quest to tighten border controls, AMLO finds himself on the same side as Donald Trump when it comes to a distaste for the North American Free Trade Agreement (NAFTA).
With Trump rejecting free trade from the perspective of economic-nationalism and AMLO rejecting it because he feels that poor Mexican farmers cannot compete with the highly mechanised industrial farms in the US – Trump’s desire to either reform or axe NAFTA will be one step closer if AMLO becomes the next President of Mexico.
At present, Trump’s hostility to NAFTA has been rejected both by arch neo-liberal Justin Trudeau, the Canadian Premier, as well as the current centre-right and deeply unpopular Mexican President Peña Nieto. Thus, however odd it might sound, the anti-Trump AMLO and the US President described by many of his critics as anti-Mexican might actually be able to come together in order to either reform or amicably agree to downgrade or otherwise scrap NAFTA entirely.
As for AMLO’s other policies, if as many suspect he will be less tax friendly to foreign companies locating some of their production operations to Mexican soil, it could score another goal for Trump as the current US leader has frequently criticised major American brands who look to take advantage of cheaper Mexican labour and produce their goods south of the border. In turn, this could lead to a new role for China in Mexico as Beijing’s model of working with poorer nations on bespoke trade and investment deals is typically viewed more favourable by leftists and populists than the zero-sum/all or nothing format the US tends to employ when making trade agreements.
While the 2026 World Cup being jointly hosted by the US, Mexico and Canada could be a motivation to keep NAFTA in place, the likelihood of a reformed NAFTA wherein Trump and AMLO could trade economic concessions for some sort of agreement on border issues, may be a scenario which one way or another unfolds in future months”.
The key to understanding the flowering partnership between Trump and AMLO even before he officially takes office is understanding that as two populists, both tend to reject the so-called centrist neo-liberalism of their respective predecessors. The fact of the matter is that Trump is a right-wing nationalist and AMLO is a left wing nationalist. While such ideologies are supposed to be at odds with each other due to their admittedly different approaches, the fact that they both identify similar problems with the old elite means that in reality Trump and AMLO have a great deal of hostility to many of the same concepts, especially when it comes to trade and foreign ownership of national resources.
In this sense, the combination of outgoing President Nieto making the pragmatic decision to take the best of any trade deal the more powerful US could offer combined with AMLO’s welcoming of the decision that kills off the old NAFTA deal he had opposed since its inception means that over the next months, the incoming Mexican President and current US President will from decidedly different ideological positions, both be in a position to apply pressure on the unapologetically neo-liberal Justin Trudeau to concede defeat in his battle to save NAFTA and sign a new Mexican style deal with Washington. The unlikely partnership between AMLO and Trump has already arrived even before AMLO has formally taken the oath of office.