Few topics seem to rankle President Trump so much as America’s “very bad deals” with its trading partners. But the U.S. isn’t alone in taking a tough stance on trade. International tensions are running high, and could come to a head this year as the U.S. renegotiates NAFTA, runs up deficits with Europe, and inches closer to a trade war with China.
The U.S. trade deficit grew 12% last year to $566 billion—the largest since 2008—intensifying the debate about what’s best for American businesses and workers when it comes to international trade. It’s a matter of debate whether those deficits are damaging the economy, but the shortfall has become an area of “maniacal focus” for the administration, says Brookings senior fellow Joshua Meltzer, adding to the uncertainty for global business.
One thing that’s for sure: Trump isn’t the only leader capable of a protectionist stance. As tension escalates, here are the negotations to watch now:
The deal: North American Free Trade Agreement
Members: The U.S., Mexico, and Canada
Most recent development: The seventh round of negotiations for the NAFTA began in Mexico City this week. Many countries will watch to see how NAFTA negotiations turn out before entering into trade talks with this White House.
Value of trade with the U.S.: Canada is the second-largest trade partner to the U.S., accounting for $582 billion in trade in 2017. Mexico is close behind with $557 in trade with the U.S. last year.
Trump’s take: “We can’t let Canada or anybody else take advantage [of us].”
On the campaign train, Trump called NAFTA “the worst trade deal in history” and as president he has repeatedly threatened to pull out, saying that an end to the trade agreement could be the “best deal” for the U.S.
Best case scenario: An update to the dated agreement that’s favored by all parties.
Worst case scenario: No deal. Tearing up the trade deal could mean a major shift for American businesses and workers. About 14 million American jobs depend on trade with Canada and Mexico, according to the U.S. Chamber of Commerce, and the end of NAFTA could cost the U.S. 1.8 million jobs, according to the Business Roundtable.
What to expect: Look for the three countries to find common ground on how often the trade deal will be renewed and rules of origin for automobiles. There is no deadline for cementing a new deal, so talks will go on for as long as it takes to reach an agreement. Experts say that if a compromise isn’t reached by the end of March, negotiations will continue into 2019.
“It’s easy to imagine [negotiations] continuing through the end of this year,” says Brookings’ Meltzer.
Unsurprisingly, politics could complicate the process. The frontrunner in Mexico’s July 1 presidential election is the leftist-populist Andres Manuel Lopez Obrador. If he wins, he may be disinclined to make compromises with the U.S.
Trade With China
The stakes: China is the United States’ largest trading partner, with $635 billion moving between the two countries in 2017. The U.S. deficit with China hit a record high last year at more than $375 billion.
Trump’s take: “We should be very tough on them on trade.”
Worst case scenario: Trade war.
Best case scenario: Fairer trade for U.S. companies (and the tech industry in particular), plus more help from China in putting economic pressure on North Korea.
What to expect: Most experts Fortune consulted said an all-out trade war was unlikely this year. Carlos Pascual, SVP of global energy at IHS Markit, noted that given the two countries’ joint efforts to contain North Korea, and the amount of U.S. debt held by the Chinese government, the world powers will likely “think four or five times” before escalating a dispute, which “would be extremely detrimental to both countries.”
But don’t an overly rosy outcome either: “I don’t think we’re going to see an actual trade agreement between the U.S. and China,” Meltzer said.
Trade the European Union
The stakes: As a whole, trade with countries in the EU exceeds the value of trade with China. The U.S. trades more than $170 billion with Germany alone at $64 billion deficit.
Trump’s take: “Very unfair”
Recent developments: European leaders have said that they will not come back to the table for trade talks with the U.S. as long as the Trump administration remains committed to pulling out of the Paris Climate Accord.
Worst case scenario: Disagreements between the U.S. and EU countries on issues like climate change and steel imports could worsen the economic relationship, moving toward a transatlantic trade war.
Best case scenario: Reopening negotiations for a trade agreement, like the Trans-Atlantic Trade and Investment Partnership, which was proposed under President Obama, would reduce barriers to trade between the U.S. and the EU. Commerce Secretary Wilbur Ross has said he would be open to resuming these trade talks.
What to expect: It’s unlikely much will change anytime soon in this trade relationship. There is no indication that TTIP negotiations, which stalled after Trump’s election, would be pushed forward by either the U.S. or the EU.
A version of this article appears in the March 2018 issue of Fortune with the headline “Trump’s Trade Wars.”