President Trump said Dec. 2 that he intends to formally withdraw the U.S. from NAFTA “shortly” after signing a replacement deal with agreement partners Canada and Mexico. However, it is unclear what the impact of such a move would be.

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Trump said submitting a formal withdrawal notice, which could end U.S. participation in NAFTA six months later, would give Congress the option of approving the U.S.-Mexico-Canada Agreement signed Nov. 30 or reverting to pre-NAFTA trade relations. In the latter scenario, U.S. trade with Canada would likely remain largely duty-free under the U.S.-Canada Free Trade Agreement, which took effect Jan. 1, 1989, while U.S. trade with Mexico would again become subject to tariffs at most-favored-nation rates under World Trade Organization rules.

However, there is some disagreement on whether a notice from the president would be sufficient to effect a complete U.S. withdrawal. NAFTA was implemented in the U.S. through legislation approved by Congress, and some hold that Congress would have to repeal that law to effectively terminate U.S. participation. Others, however, say U.S. trade law gives the president authority to end trade deals without congressional approval. A New York Times article adds that Congress “could proactively pass legislation, with a veto-proof majority, blocking [the president] from pulling out of NAFTA” but that “most legislative leaders think that scenario is unlikely.”

© [2018], Sandler, Travis & Rosenberg, P.A. Originally published in the [12/04/2018] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.