President Donald Trump has stated that the U.S. would rather renegotiate NAFTA than simply exit it, the New York Times reports. That followed reports from Politico that a withdrawal was imminent. That shouldn’t be a surprise. Mexico and Canada have both expressed a preference to negotiate. This may simply be a case of “anchoring” – namely leaving withdrawal as a serious threat if the U.S. doesn’t like the way talks are going.

The trade deficit remains the Trump administration’s key trade metric, as highlighted again in a tweet from the President. While Mexico and Canada account for 17.9% of the U.S. deficit in the 12 month to February 28, Panjiva data for U.S. imports and exports shows, they also account for 33.9% of exports. A straight withdrawal would therefore have many losers as well as winners.

The next stage will be to formally declare an intention to renegotiate NAFTA to Congress. That could happen as soon as today. In any event if the administration wishes to start formal negotiations by the summer recess then a deadline of May 2 applies, as outlined in Panjiva research of April 26. In theory the President could go straight to talks without the consultation period, but that would remove the ability to have a simple “up-down” vote at a later stage.

Bars segment U.S. trade deficit (goods exports less imports) by country of partnership. Right hand axis indicates NAFTA’s share of U.S. exports  Source: Panjiva