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US lifts tariffs on Canada and Mexico in boost for trade pact

The United States struck deals to lift tariffs on steel and aluminum imports from Canada and Mexico.

20 May 2019, at 9:37am

Reuters reported that the United States struck deals on Friday 17 May to lift tariffs on steel and aluminium imports from Canada and Mexico, the three governments said, removing a major obstacle to legislative approval of a new North American trade pact.

The separate agreements, which will not impose US quotas on Canadian and Mexican metals shipments, will also eliminate Mexican and Canadian retaliatory tariffs on a broad range of US products, including pork, beef and bourbon.

The United States and Canada said their agreement will be implemented by Sunday afternoon, and includes new curbs aimed at preventing dumped steel and aluminium from China and other countries from entering the US market via Canada.

President Donald Trump had imposed the global “Section 232” tariffs of 25 percent on steel and 10 percent on aluminium in March 2018 on national security grounds, invoking a 1962 Cold War-era trade law.

Both Canada and Mexico argued for 14 months that their metals industries posed no security threat as their economies are integrated with the United States, and challenged the tariffs before the World Trade Organization.

“This is just pure good news for Canadians,” Canadian Prime Minister Justin Trudeau told reporters after announcing the deal to workers at Stelco Holdings Inc’s steel mill in Hamilton, Ontario.

Stelco shares soared 11 percent on the news, while top US steelmaker Nucor fell 3.1 percent and US Steel Corp, which had seen massive profit improvement because of the tariffs, fell 1.2 percent.

Spokesmen for US Steel and Nucor, which had advocated for maintaining strong tariff protections, could not be reached for comment.

Trade deal vote

The metals tariffs were a major irritant for Canada and Mexico and had caused them to halt progress toward ratification the new US-Mexico-Canada Agreement, the trilateral trade deal to replace the 25-year-old North American Free Trade Agreement.

US lawmakers with constituents suffering from Canadian and Mexican retaliation, including Senate Finance Committee Chairman Chuck Grassley, also said they would not consider a USMCA vote with the tariffs in place.

After the deal, Grassley tweeted: “Thank u Mr President for really helping the farmers of Iowa w this important step in USMCA. w lifting metal tariffs @realdonaldtrump just proved he can deliver on negotiations. China ought to take note/start dealing in good faith & take Pres Trump seriously.”

Trudeau said Canada would now work with the United States on the timing of USMCA ratification and said he was optimistic Canada would be “be able to move forward well in the coming weeks”.

US Vice President Mike Pence said he would meet with Trudeau in Ottawa on May 30 to discuss “advancing” ratification.

Several US Democrats applauded removal of the tariffs, but said USMCA was not yet ready for their support.

“When it comes to the new agreement, House Democrats continue to have a number of substantial concerns related to labour, environment, enforcement, and access to affordable medicines provisions. Those issues still need to be remedied,” said House Ways and Means Committee Chairman Richard Neal.

Neal added that the deal does not address global steel overcapacity and criticised Trump’s handling of trade negotiations with China, which deteriorated significantly in the last two weeks.

Trump, speaking to realtors in Washington, called the pact “a fantastic deal for our country” and said Congress would hopefully approve the USMCA quickly. “Then the great farmers and manufacturers and steel plants will make our economy even more successful than it already is.”

Jesus Seade, Mexico’s deputy foreign minister for North America, said the deal “measurably increases the probability” the USMCA will be approved before the US Congress’ summer break in August. Some US. lawmakers say passage would become more difficult after the recess due to budget battles expected in the fall and increased 2020 presidential campaign activity.

Transshipments, surges

Trump’s metals tariffs have been largely aimed at keeping excess production from China out of the US market, and the deal includes a new monitoring mechanism aimed at preventing steel and aluminium from China and other countries from being transshipped through Canada and Mexico to the United States.

But the US Trade Representative’s office also said the deal allows it to reimpose tariffs in the event of “surges” in imports of specific steel products. If tariffs are reimposed, retaliation would be limited to the steel and aluminium sectors.

Carmakers, which have announced hundreds of millions of dollars in higher US costs due to the tariffs, praised the deal and said it brought USMCA passage a big step closer.

“While many automakers already source the vast majority of their steel and aluminium domestically, tariffs drive those prices up which decreases investment and harms auto workers and ultimately consumers,” said the Alliance of Automobile Manufacturers, a trade group representing most major brands including General Motors Co, Toyota Motor Corp Volkswagen AG and others.

The National Pork Producers Council, which says retaliatory tariffs have cost its members $12 per animal, or a total of $1.5 billion, also expressed relief at the end of “a trade dispute that has placed enormous financial strain on American pork producers.”