Trump Pledges to Stay in Nafta, After Aides Said He Threatened Withdrawal -- Update

The Trump administration said it was no longer considering pulling out of the North American Free Trade Agreement, following a day of intense lobbying from business leaders and lawmakers who rallied to quash internal White House discussion of the prospect.

The White House said in a statement issued late Wednesday night that President Donald Trump had called his Mexican and Canadian counterparts following widespread reports he was considering pulling out of the 23-year-old pact that stitches the three economies tightly together.

In the calls, "President Trump agreed not to terminate Nafta at this time," the statement said, adding that three countries would proceed soon, as expected, to begin talks over renegotiating the agreement.

The daylong public zigzag over trade illustrated both the confusion that often marks Trump administration policy making, as well as the battles inside his administration pitting economic nationalists against top business leaders he has tapped to run his economic team. The former faction had been pushing for the Nafta withdrawal threat as a big hammer to force concessions from the two trading partners, while the latter has tried to temper Mr. Trump's periodic attempts to pick fights with allies over trade.

Multiple White House aides said the idea of a Nafta withdrawal statement was under consideration, and that it was to be discussed at a Wednesday evening meeting of the National Economic Council, which is headed by former Goldman Sachs Group Inc. President Gary Cohn.

The White House statement said that Mr. Trump spoke with Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau and that "both conversations were pleasant and productive."

Mr. Trump has vowed since taking office to renegotiate the deal that he has branded "a disaster," and the statement made clear he was sticking with that plan, albeit without the threat of pulling out of the pact altogether.

"The leaders agreed to proceed swiftly... to enable the renegotiation of the Nafta deal to the benefit of all three countries," the statement said.

After weeks of harsh statements, first about Mexico, then about Canada, Mr. Trump issued a statement praising his counterparts.

"It is an honor to deal with both President Peña Nieto and Prime Minister Trudeau," the statement quoted Mr. Trump as saying, "and I believe that the end result will make all three countries stronger and better."

When word first spread Wednesday morning about the internal White House debate, first reported by Politico, the reports shook financial markets and triggered a swift reaction from the American business community and members of Congress to try to quell the prospect.

The statement on Wednesday evening caused whiplash. The Mexican peso recently was up 1% against the dollar after weakening 1.7% during the U.S. trading day, the biggest daily loss since January.

"Withdrawing from Nafta would have disastrous consequences for U.S. businesses and workers, benefiting our competitors in Europe and Asia, including China," said Joshua Bolten, chairman of the Business Roundtable, which represents some of the biggest U.S. firms.

The agriculture industry, one of the biggest beneficiaries of Nafta, also pulled out the stops to block the move. "There are some things that sound good politically but are potentially dangerous in the real world," said Kent Bacus, an official with the National Cattlemen's Beef Association, whose members rely heavily on exports across both borders. "For the U.S. beef industry, withdrawing from Nafta is one of the most dangerous moves we can make at this time."

Members of Congress from both parties -- especially those from border states that have benefited from the pact -- rushed to criticize the possible move.

"Withdrawing from #NAFTA would be a disaster for #Arizona jobs & economy, " Arizona Republican Sen. John McCain tweeted.

Massachusetts Rep. Richard Neal, the top trade Democrat in the House, said that even though he had voted against the original Nafta deal, a White House order withdrawing from the pact "would create incredible uncertainty and hinder our ability to create jobs."

Mexicans warned that a U.S. move to force a renegotiation with the threat of withdrawal would backfire, stoking an anti-Trump political backlash ahead of presidential elections next year.

"It would be unacceptable for Mexico and Canada -- you just can't sit down to negotiate with a gun to the head," said Jaime Zabludovsky, a member of the Mexican team that negotiated Nafta, who is now advising Mexican companies over Nafta renegotiation.

Part of what is driving the Nafta debate this week is a desire by Mr. Trump and his aides to show progress on meeting his campaign promises before his presidency hits the 100-day mark this Saturday.

A Nafta overhaul "is a major campaign pledge of the president and he's spoken about it throughout the first 100 days," one White House official said.

Mr. Trump plans to hold a 100-day rally Saturday in Monessen, Pa., where he laid out his "America First" trade program during the presidential campaign last June.

"I'm going to tell our Nafta partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers," he said in that speech. "If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the Nafta agreement that America intends to withdraw from the deal."

The White House debate over a Nafta pullout order also comes as the president has expressed growing frustration with congressional procedures that have delayed the start of negotiations until at least late this summer.

Congressional rules prohibit Mr. Trump from launching a Nafta renegotiation until the Senate has confirmed his trade representative, which it has yet to do. And even then, the administration has to give Congress a 90-day notice before starting the negotiations.

The trial balloon of the withdrawal threat seemed aimed at creating more urgency, both on Capitol Hill and in Canada and Mexico.

The discussion about pulling out of Nafta follows rising tensions with Canada, in particular, after the Trump administrated moved earlier this week to curb imports of Canadian lumber in a long-running dispute, and threatened to penalize the Canadian dairy industry over what Mr. Trump branded unfair limits on U.S. exports.

Mr. Trump's phone call Wednesday with Mr. Trudeau was their second discussion in two days.

Mr. Trudeau's office issued a statement following the second call Wednesday, saying "the two leaders continued their dialogue on Canada-U.S. trade relations, with the prime minister reinforcing the importance of stability and job growth in our trade relations."

Paul Vieira, Santiago Pérez and William Mauldin contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Peter Nicholas at peter.nicholas@wsj.com

(END) Dow Jones Newswires

April 27, 2017 00:17 ET (04:17 GMT)