Here’s what happens if the US and Canada can’t make a NAFTA deal by Friday

Trump’s deadline is political, and the two sides might have more time to negotiate.

Friday is the Trump administration’s deadline to reach a deal with Canada on NAFTA.

The two countries have been locked in discussions this week over revising NAFTA, or the North American Free Trade Agreement, after the US upped the pressure by announcing they had reached a preliminary trade deal with just Mexico.

But though they made positive sounds earlier in the week, negotiations have reportedly started to drag. The Canadian newspaper the Globe and Mail reported that the US and Canada remain divided over how to resolve certain trade disputes.

One sticking point is Chapter 19, a provision of NAFTA that sends trade disputes involving anti-dumping and countervailing duties to be decided before an independent panel, rather than domestic courts.

The US wants to get rid of Chapter 19 — and Mexico seemed to acquiesce (or, as one trade expert told me, Mexico might have decided it was easier to let Canada deal with it). But Canada says it’s necessary to protect its industries, so the US and Canada are reportedly at a standstill.

This doesn’t bode well, since it seems the Trump administration’s strategy is to refuse to make any concessions.

During an interview with Bloomberg News on Thursday, the US president reportedly boasted off the record that an agreement with Canada would be “totally on our terms” and suggested that his threats of auto tariffs were working, according to the Toronto Star’s Daniel Dale.

“Off the record, Canada’s working their ass off. And every time we have a problem with a point, I just put up a picture of a Chevrolet Impala,” Trump reportedly said about the negotiations, referencing his threat of placing tariffs on auto imports.

Canada and the US may still be able to cobble something together by day’s end. But if they don’t, a future NAFTA deal isn’t totally dead.

What happens if the US and Canada don’t make a deal by Friday?

First, let’s be clear that the Friday deadline is something the Trump administration made up— it’s more or less determined by politics.

The US president, by law, has to give Congress 90 days’ notice that he plans to sign a trade agreement. He wants to do that by this week, because Mexico’s government will change hands by December 1, when the newly elected leftist president Andrés Manuel López Obrador takes over. Trump doesn’t want to risk losing the deal he made with the current Mexican administration, so he would prefer to get a new NAFTA deal locked down sooner rather than later.

But Canada is also aware of this deadline and, thus, the fact that the Trump administration is bluffing a bit.

“This is President Trump and [US Trade Representative] Robert Lighthizer holding a gun to the head to Canada, [saying,] ‘Agree to this this week or else we’ll go bilateral,’” Christopher Wilson, the deputy director of the Wilson Center’s Mexico Institute, told me earlier this week. “But because that is sort of an invented set of timelines, it’s not clear the gun is loaded.”

“Canada could just as easily call the United States’ bluff as it could use this as an opportunity to wrap things up,” Wilson continued.

Indeed, Canadian Prime Minister Justin Trudeau made it clear this week that Canada wouldn’t rush to make an agreement if it isn’t in their interests to do so. “We recognize that there is a possibility of getting there by Friday, but it is only a possibility, because it will hinge on whether there is ultimately a good deal for Canada,” Trudeau said. “No NAFTA deal is better than a bad NAFTA deal.”

Even Trump himself admitted — on the record — that the Friday deadline was squishy.

“Canada’s going to make a deal at some point. It may be by Friday or it may be within a period of time,” Trump told Bloomberg. But, he added, “I think we’re close to a deal.”

Canada also has an unexpected ally in this dealmaking process: Congress. Democrats and Trump’s Republican allies want any new NAFTA deal to include Canada, and they’re not eager to move ahead solely with a bilateral agreement with Mexico.

There are a few reasons why, but it’s mainly because Canada is one of the US’s largest trading partners, and the supply chains between the two countries — particularly the automotive industry — are deeply intertwined. This means that Trump can threaten to place auto tariffs on Canada, but US manufacturers and consumers will feel the pain too.

So it’s unclear if the two countries will clinch a deal in the final hours, but it does seem likely that Trump will notify Congress that he plans to sign an updated NAFTA no matter what happens during this current round of negotiations by Friday.

There are a couple of scenarios that could play out. Wilson told me that the US and Canada could potentially strike a preliminary deal but keep negotiating and hammering out the final details — an agreement to agree later. That would allow Trump to notify Congress that a revised NAFTA is coming in 90 days, but he still has 30 days to submit a finalized deal to lawmakers once the clock starts, according to the Washington Post.

That means the real deadline to carve out a new NAFTA is the end of September. Canada, the US, and Mexico can (and probably will) continue discussions until then.

Trump can also try to send that Mexico-US bilateral agreement to Congress as a NAFTA replacement, as he’s threatened to do earlier this week, maybe adding in Canada later, maybe not. But again, that seems less likely to happen, as Congress wants Canada included, and it’s not clear lawmakers would agree to a fast-track vote — basically, a straight up-or-down vote, with no amendments or changes — on an entirely new US-Mexico deal.

Though Trump could threaten to withdraw from NAFTA, or even attempt to do so, Congress would likely be able to block such a move.

Put together, this means there’s still hope for a new NAFTA, but it may not happen on Trump’s timeline. It will also look a lot like the old NAFTA, with just a few tweaks around the margins that could potentially benefit workers — even if Trump does come up with a brand new name.