WASHINGTON — President Donald Trump campaigned on a promise to overturn U.S. trade policy and bring down the country’s massive, persistent trade deficits.

After a year in the White House, he still has a lot of work to do.

The Commerce Department reported Tuesday that the U.S. trade deficit in goods and services rose 12 percent to $566 billion last year, biggest since 2008. A record $2.9 trillion in imports swamped $2.3 trillion in exports last year.

The deficit in the goods trade with China — frequently accused of unfair trading practices by the White House — hit a record $375.2 billion in 2017. The goods gap with Mexico climbed to $71.1 billion.

“Trump’s trade team has not been able to stem the flood of imports into the country yet,” said Chris Rupkey, chief financial economist at MUFG Union Bank.

The Flip Side of Good Times

Trump likes to boast about the American economy’s strength. Economic growth rose to 2.3 percent last year from 1.5 percent in 2016, despite getting off to a slow start in 2017. The unemployment rate is idling at a 17-year low 4.1 percent. Wages finally seem to be growing.

Recent history shows that the trade deficit tends to grow when times are good and shrink when they turn bad. The trade gap hit a record $762 billion in 2006 toward the end of a six-year economic expansion. It dropped to $384 billion in 2009, in the depths of the Great Recession as American consumers hunkered down and bought fewer imports.

“If the goal is to reduce the trade deficit, we know how to do that — just send our economy crashing and we won’t be able to afford to import as much,” says Bryan Riley, director of the conservative National Taxpayers Union’s Free Trade Initiative.

Tough Talk, Little Action

On the campaign trail, candidate Trump talked tough on trade. He threatened to slap big tariffs on Chinese and Mexican imports and said he’d tear up trade treaties and sanction China for manipulating its currency.

He’s been more cautious since taking office.

The trade gap grew even though the U.S. dollar dropped nearly 7 percent last year against the currencies of its major trading partners, a move that gives U.S. companies a price edge in foreign markets and makes imports pricier in America.

Dean Baker, senior economist at the left-leaning Center for Economic and Policy Research, says it takes time for a weaker dollar to have an impact on the trade balance.

Countries run trade deficits when they buy more products from other countries than they sell and run surpluses when they export more than they import. The United States has not turned a trade surplus since 1975, when Gerald Ford sat in the White House and “Jaws” ruled the box office.

Why hasn’t Trump been able to begin rebalancing America’s lop-sided trade relationship with the rest of the world? Economists and trade analysts offer several explanations:

Yes, he withdrew from an Asia-Pacific trade pact negotiated by the Obama administration.

But he abandoned plans to label China a currency manipulator. His attempt to renegotiate the North American Free Trade Agreement with Canada and Mexico — which he labeled a job-killing “disaster” — has bogged down amid resistance from Ottawa, Mexico City and U.S. businesses and farmers that enjoy NAFTA’s market-opening benefits.

U.S. investigations into whether cheap aluminum and steel imports threaten U.S. national security, which could lead to trade sanctions, have been delayed by pressure from U.S. companies that consume steel and aluminum.

“It’s not surprising that the deficit is up because in Year One there has been a wide gulf between Trump’s fiery trade rhetoric and action,” says Lori Wallach, director of Public Citizen’s Global Trade Watch and a critic of NAFTA and other trade deals. “So the same failed trade policy Trump attacked as a candidate is still in place.”

Sailing Against Strong Economic Currents

Even if Trump began aggressively taxing imports and strong-arming other countries into meeting his demands to buy U.S. exports, he still likely would find it hard to make a big dent in America’s trade deficit.

“Trade deficits are generally not susceptible to manipulation through trade policy,” says Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs. Levy notes that Germany runs a big trade surplus and France a deficit even though both operate under the European Union’s common trade rules.

Instead, trade deficits are the consequence of bigger economic forces. The United States spends more than it saves. Just look at budget deficits in Washington and credit-card balances in American households. When you spend more than you produce, imports fill the gap.

Mexico’s foreign relations secretary said Friday that it might come as a surprise but his country’s relationship with the United States today is “more fluid” and “closer” than it was with previous U.S. administrations.

Mexico has had well-publicized disagreements with President Donald Trump during the past year over trade, immigration and payment for a proposed border wall. But Foreign Relations Secretary Luis Videgaray said that “with the Trump administration, we’re committed to having a very close communication and that has proven to be a tremendous benefit for the relationship.”

“It might be surprising to some people, but that’s a fact of life,” Videgaray said at a joint news conference in Mexico with U.S. Secretary of State Rex Tillerson and Canadian Foreign Affairs Minister Chrystia Freeland. The three countries are currently renegotiating the North American Free Trade Agreement.

Tillerson’s stop in Mexico kicked off a six-day Latin America trip that will also take him to Panama, Argentina, Peru, Colombia and Jamaica. He was greeted in Mexico City by a handful of protesters holding up signs reading “Dreamers, Trump’s hostages,” and “We are workers, not terrorists, not criminals.”

The three spoke about security concerns, especially the trafficking in opiates and synthetic opiates like fentanyl that have caused a wave of overdose deaths.

“Given the deadly nature of the opioid crisis, we must do more to attack the business model of those who traffic drugs and guns,” said Tillerson.

Asked about reports of Russian meddling in Mexico’s July 1 presidential elections, Tillerson said “we know that Russia has fingerprints on elections around the world … my advice to Mexico would be to pay attention.”

The three officials said they also discussed the political and economic crisis in Venezuela and its government’s decision to push up presidential elections to April under conditions that opponents say overwhelmingly favor President Nicolas Maduro, who is so far the only candidate.

“We shared our concerns for the humanitarian crisis that has unfolded in Venezuela,” Tillerson said. “We all urge the Maduro regime to return to free, open credible, democratic elections.”

Videgaray was quick to note that Mexico has limits on how far it will go in pressuring Venezuela.

“Mexico will in no case support any option that implies violence,” Videgaray said.

Tillerson said the United States wants to see a “peaceful transition.”

“If President Maduro would return to the Venezuelan constitution, restore the duly elected assembly, dismantle the illegitimate constituent assembly and return to free and fair elections, then he’s happy to stay and run in the free and fair elections,” Tillerson said. “If he wants to step aside and let someone else run in them, that’s fine.”

Venezuelan officials condemned Tillerson’s remarks earlier Thursday at the University of Texas. Tillerson said that throughout the course of Latin America’s history it has often been the military which has stepped in to “manage a peaceful transition.”

That stung the Venezuelan government, whose soldiers have reportedly been going hungry like much of the rest of the population.

Venezuelan Defense Minister Vladimir Padrino Lopez went on state television Friday, flanked by a half-dozen military officers in uniform, to denounce Tillerson’s comments. He said Venezuela’s military is united and would never succumb to the influence of a foreign power.

“You don’t know what you are doing,” he said. “I invite you to correct yourself.”

Venezuelan officials accused Tillerson of using his current trip to increase pressure on governments around the region to join the U.S. in “a perverse plan of aggressions against Venezuela.”

Leaders of 27 metropolitan Chambers of Commerce from Canada, the U.S. and Mexico will gather in Montreal on Monday to send a strong message that they are collectively united in favour of the North American Free Trade Agreement. 

“As representatives of the business community and Canada, Mexico and the U.S., we think it’s important that all governments from Canada, the U.S. and Mexico understand that we are in support of NAFTA and that we share a common desire to maintain free trade between us,” Zoe Addington, Calgary Chamber’s director of policy, told CBC News.

The meeting, which is an initiative of the Canadian Global Cities Council, will see eight Canadian, eleven American and eight Mexican chambers in attendance — collectively representing economic zones worth more than $1.4 trillion US. 

“NAFTA is an exceptionally good deal for all three countries,” said Addington.

“NAFTA has created economic ties between Canada, the U.S. and Mexico that have quadrupled trade, have increased investment and increased jobs.”

The trade agreement adds up to over $1.5 trillion US annually, and that 14 million jobs in the U.S., two million in Canada and three million in Mexico depend on trade between the three countries, said Addington.

In Canada, Alberta is the second-most dependent province on NAFTA — in 2015, 88 per cent of exports from the province went to either the U.S. or Mexico.

New Brunswick and Ontario would also likely be hit hard if the deal were to crumble.

Rumours have swirled about the possibility the upcoming round of talks in Montreal (set to run from Jan. 23 to 29) could signal the collapse of the free trade agreement. 

But Addington said worried onlookers should consider the talks as an “opportunity to modernize a 23-year-old agreement.”

“There are still positives to the renegotiation — as long as there is still an agreement at the end,” she said. 

Leaders of the Chambers of Commerce from the following cities are set to attend Monday’s meeting: Winnipeg, Vancouver, Toronto, Montreal, Halifax, Edmonton, Calgary, Brampton, St-Louis, San Antonio, Minneapolis, Los Angeles, Kansas City, Detroit, Dallas, Cleveland, Charlotte, Boston, Albany, Veracruz, Toluca, Tijuana, Querétaro, Monterrey, Mexico City, Mérida and Chihuahua.

Mexico’s central bank said Tuesday it will seek to bolster the peso amid concerns that the U.S. tax overhaul could reduce investment flows to Mexico.

The Bank of Mexico said it would increase the currency coverage contracts it auctions to cushion the risk of holding pesos. The bank said it will add $500 million in non-deliverable, renewable forwards to its initial offering of $5 billion.

Mexico’s currency market has been highly volatile in recent days, with the peso dropping as low as 19.72 to the dollar in trading Friday. And the bank’s move Tuesday did not spark a peso rally as the 48-hour interbank rate closed even weaker at 19.88 to $1.

The Italian-Argentinean multi-national Grupo Techint pitched to Mexican President Enrique Peña Nieto an investment project of more than US$ 1 billion to develop a hot-rolled steel mill in the industrial center that Techint launched in 2013.

Paolo Rocca, Techint’s chairman, said that the development should take the steel company Ternium into operations in the second half of 2020. The plant’s annual output capacity is estimated at 3.7 million metric tons.

According to the company, the plant is intended to meet the demand of both the automotive industry and the sectors of household appliances, machinery, energy and construction.

Almost a year ago, after heavy criticism from President-elect Donald J. Trump, Ford Motor Company canceled plans to build a $1.6 billion car plant in Mexico and announced that it would instead equip a Michigan factory to make electric and hybrid models.

Now the automaker is changing its plans again, saying it intends to assemble new battery-powered cars in Mexico, not Michigan. But the Michigan location will get an even larger investment than previously planned and will focus on making a range of self-driving cars.

The switch comes as the Trump administration has been pushing to renegotiate the North American Free Trade Agreement with Canada and Mexico. Few industries are more heavily affected by the accord than the auto sector, which has rushed to build plants in Mexico over the last several years to take advantage of lower labor costs and that country’s extensive network of trade agreements.

Late last month, Vice President Mike Pence met with top executives from Ford, General Motors and Fiat Chrysler to discuss trade and the renegotiation effort.

Automakers have been concerned that changes to the trade accord, such as rules requiring the use of more American-made parts, could raise the cost of vehicles produced in Mexican plants and hurt the value of the plants they have built.

Sherif Marakby, Ford’s vice president for autonomous vehicles and electrification, said Thursday that the company had altered its plans for the Michigan plant — in Flat Rock, 25 miles southwest of Detroit — because it now expected the market for self-driving cars for taxis and delivery fleets to grow rapidly after it rolls out its first model in 2021.

“We want to make sure we have the capacity at Flat Rock when we launch,” he said in an interview. “We are very optimistic that we will grow the volume in the autonomous business.”

Ford now plans to invest $900 million in the Flat Rock location, up from $700 million. The company said the retooling for autonomous vehicles would create 850 jobs there, 150 more than it previously expected.

Producing electric cars in Mexico will enable Ford to take advantage of lower labor costs and improve the “fitness” of that business, Mr. Marakby said.

Ford’s change in plans was reported by The Wall Street Journal and later confirmed by the automaker.

Electric vehicles tend to be expensive to build and generate thin profit margins or even lose money because batteries remain costly and sales volume low. Auto wages in Mexico rarely exceed $10 an hour, compared with about $29 an hour in the United States.

“If you’re worried about your margins on your E.V., moving production to Mexico is not a bad idea,” said Mike Ramsey, an automotive analyst at Gartner.

Ford plans to begin assembling a small, battery-powered sport-utility vehicle in a plant in Cuautitlán, north of Mexico City, in 2020. The vehicle is supposed to go 300 miles before needing to recharge its battery, giving it a greater range than any electric cars now on the market.

Ford plans to follow that model with at least 12 electric vehicles as part of a broader, global strategy. Ford and other automakers expect sales of electric cars to take off in the years ahead as China, European Union countries and others push automakers to cut tailpipe emissions.

Ford’s shift drew no immediate public comment from President Trump. While campaigning last year, he criticized the company repeatedly for its plan to build a small-car plant in Mexico. He also criticized G.M. for importing Chevrolet hatchbacks from a Mexican plant.

In January, in the days leading up to Mr. Trump’s inauguration, Ford announced that it was canceling the new plant and investing in Flat Rock instead. That drew compliments from the president-elect.

In May, however, Ford ousted its chief executive, Mark Fields, and replaced him with Jim Hackett. Under Mr. Hackett, Ford seems to have taken a different tack. In one of his first moves, he set a plan to import Focus compacts into the United States from a plant in China.

German manufacturer Leoni AG opened its fifth plant in Mexico yesterday in the Yucatán port city of Progreso de Castro.

The new wiring systems division plant will manufacture cabling and harnessing for automotive assembly plants in Mexico and for export to General Motors, BMW and Volvo plants located on the Asian continent and in the United States.

The plant currently employs over 2,000 people, 65% of whom are women. Division vice-president Ralf Maus explained that once the new facility reaches its full capacity sometime next year, over 2,600 people will be directly employed by it.

The 25,000-square-meter factory, an investment of 350 million pesos (nearly US $19 million) produces about one-third of its energy needs with 1,500 solar panels and employs a water recycling system that saves 100,000 liters of water per year, the federal Economy Secretariat said in a statement.

Maus was joined at a dedication ceremony by Yucatán Governor Rolando Zapata Bello and federal Economy Secretary Ildefonso Guajardo Villarreal.

Zapata recalled that Leoni’s presence in the state was the result of a business trip he took to Germany last year.

The new plant, he said, offers “new horizons [and] confirms that Yucatán can aim higher and progress.”

The governor pointed out that the state has everything it needs to become a strategic and innovative link in the automotive industry supply chain.

The creation of new and modern infrastructure, he continued, is the way of closing gaps and to continue consolidating the state as a logistics and business platform for the benefit of citizens.

Maus said Leoni chose Yucatán for its newest Mexico plant for its logistics infrastructure, security, education, the high qualifications of its human capital and the professionalism of its administration.

Secretary Guajardo said the automotive industry has changed drastically over the last decade.

“Six of every 10 auto industry jobs will cease to exist and will become different kinds of jobs over the next decade. For this reason, we must be on the front lines of innovation,” he said.

MEXICO CITY 

MEXICO CITY: Canada and Mexico will rebuff the United States over its demand for tougher NAFTA automotive content rules, top officials said on Monday as negotiations to renew the treaty bogged down with only a few months to go.

U.S. President Donald Trump is threatening to quit NAFTA, which has reshaped the continent’s auto sector over the past 23 years, unless major changes can be made to return manufacturing jobs to the United States.

Canadian and Mexican negotiators will address the U.S. auto demands on Tuesday, the final day of the fifth round of talks to update the North American Free Trade Agreement, chief Mexican negotiator Ken Smith told reporters.

Although the talks are due to wrap up in March 2018 after a seventh and final round, they are deadlocked over a series of hard-line proposals the United States unveiled at the fourth round last month.

“It’s definitely slowed down from the previous round,” said a Canadian source with direct knowledge of the talks. “There has been no progress in the contentious chapters.”

Canadian and Mexican officials have complained repeatedly about what they see as U.S. inflexibility. A spokeswoman for the U.S. Trade Representative declined to comment.

Negotiators say they need to finish their work before campaigning for Mexico’s presidential election formally begins at the end of March.

The campaign team for the leftist former mayor of Mexico City and early front-runner, Andres Manuel Lopez Obrador, on Monday repeated calls for the NAFTA talks to be postponed until after the July presidential vote.

The Canadian source said the sixth round would be held in Montreal at the end of January 2018.

Mexico and Canada fear Trump will follow through on a promise to pull out of NAFTA, causing disruption and economic damage. The Canadian dollar edged lower against its U.S. counterpart on Monday, in part because of concerns about the negotiations.

Alarmed U.S. politicians and industry groups have started to put concerted pressure on the White House not to take drastic moves they say would cause job losses.

“Support for NAFTA from the American private sector, and also members of Congress, and even Republican governors, is starting to get very vocal, which we view very positively,” said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby.

Jeff Leal, farm minister for the powerful Canadian province of Ontario, said in an interview he believed the increasingly vocal U.S. protests would help those who wanted to keep NAFTA.

FRICTION OVER AUTO CONTENT STANDARDS

Canada and Mexico are particularly unhappy about the U.S. push for tougher autos content. Vehicles and auto parts account for most of the US$64 billion U.S. trade deficit with Mexico, a sore spot for Trump.

The Trump administration wants half of the content of all North American-built autos be produced in the United States and that the regional vehicle content requirement be increased to 85 percent from 62.5 percent.

Canada and Mexico dismiss the idea as unworkable and plan to respond with presentations on how such a move would damage the North American auto industry, people briefed on the talks said.

A Mexican auto industry representative with knowledge of the talks called the U.S. proposal “insane” on Sunday.

“There is no product made in North America that meets this rule of origin requirement,” said Matt Blunt, president of the American Automotive Policy Council, which represents Ford Motor Co , General Motors Co and Fiat Chrysler.

In San Antonio, Texas, a senior U.S. official told a Senate panel that the administration wanted to rebalance the large automotive trade deficit with Mexico.

U.S. business groups are pinballing between despair and panic as negotiations over a new North American Free Trade Agreement resume, with the Trump administration’s hard-line demands risking a worsening standoff and perhaps the eventual collapse of the talks.

Corporate concerns were only inflamed by President Trump’s Asia trip, which showcased his “America First” trade policy and left the United States isolated as 11 other nations agreed to new trade liberalization measures.

On the eve of this week’s NAFTA talks, the fifth of seven scheduled rounds, the uncompromising U.S. stance now risks scuppering a 23-year-old treaty that helped knit together a colossal continental economy, business groups said.

“Everybody I talk to is very gloomy,” said Bill Reinsch, a distinguished fellow with the Stimson Center and a former head of the National Foreign Trade Council. “People are expecting very little out of this round.”

In a belated mobilization to save the deal, the U.S. Chamber of Commerce in recent weeks flooded Capitol Hill with executives from companies that stand to lose lucrative trade preferences if Trump fulfills his threat to withdraw from the treaty.

The Trade Leadership Coalition, a separate industry-funded group headed by a former Caterpillar lobbyist, last week began airing pro-NAFTA advertisements in nine states that Trump won in 2016.

The 60-second television ads — running in Texas, Tennessee, Nebraska, South Dakota, Mississippi, Michigan, Ohio, Iowa and Indiana — highlight economic gains in manufacturing and agriculture before concluding: “The United States is stronger than ever before . . . NAFTA works, but President Trump is threatening to withdraw from NAFTA.”

The conjunction of the NAFTA talks in Mexico City this week and the president’s return from his five-nation Asia swing have underscored Trump’s continued difficulty translating his populist trade instincts into tangible achievements.

The last NAFTA round, in Washington, ended on a sour notewith Mexico, Canada and U.S. business groups expressing alarm over several U.S. proposals.

“NAFTA is in a very difficult place because the U.S. has put a series of demands on the table that are unlike demands that have been seen in any other trade agreement,” said Robert Holleyman, deputy U.S. trade representative under President Barack Obama. “Canada and Mexico are completely unclear about how to respond.”