Trump Announces Lifting of Metal Tariffs on Canada, Mexico

Posted on 05/17/2019 1:59 PM

Trump confers with Canadian PM Trudeau

The U.S., Canada and Mexico announced they reached an agreement that would lift metal-related tariffs.

President Donald Trump said: “I am pleased to announce that we've just reached an agreement with Canada and Mexico, and we will be sending our product into those countries without the imposition of tariffs or major tariffs,” Trump said Friday in announcing the agreement. “Hopefully, Congress will pass the USMCA quickly,” he added, using his preferred acronym for the revised North American Free Trade Agreement.

Link to U.S., Canada joint statement.

Link to U.S., Mexico joint statement.

Trump spoke Friday (May 17) with Canadian Prime Minister Justin Trudeau, their third call in about a week, according to a statement from the Canadian government. While Mexico was also covered by the tariffs, it is a much smaller producer of industrial metals than either the U.S. or Canada.

Trudeau comments. Speaking from Stelco, one of the two major producers in Canada’s steel-making epicenter of Hamilton, Ontario, Trudeau said the deal was “pure good news.” Trudeau signaled that the lifting of the tariffs could help clear the way for the ratification of the USMCA reached late last year. “We are very optimistic we will be able to move forward in coming weeks,” he said, adding the deal was “a huge step forward.” The prime minister said the deal stemmed from steady conversations with the U.S, including with Trump and said there was agreement on both sides that the tariffs were “harming workers and consumers on both sides of the border.”

Vice President Mike Pence tweeted that he will travel to Ottawa, Canada on May 30 to meet with Trudeau on advancing the USMCA.

In a joint statement, the U.S. and Canada agreed that the metal tariffs would be lifted by Sunday. Canada, in return, would lift retaliatory duties it had assessed on U.S. goods. Jesús Seade, the undersecretary for North America at Mexico’s Foreign Ministry, said that he hoped that ending the dispute would give “an extra push” toward ratifying the USMCA. Mexico will lift its retaliatory tariffs in a couple of days, he said.

The U.S. imported about $14 billion of steel and aluminum from Canada last year. After the U.S. imposed the metal tariffs last June, Canada hit back with tariffs of 10% to 25% on about 13 billion of U.S. goods, including steel, whiskey, appliances and motorboats.

The countries agreed to take steps not to import steel and aluminum at below-market prices or produced with unfair subsidies and to prevent shipment of those metals from other countries — a provision aimed at preventing Chinese metals from being shipped through Canada and Mexico to the U.S.

The countries also agreed that they could issue tariffs and counter-tariffs on a narrow basis in case of surges of imports.

The U.S. imported about $3.5 billion in steel and aluminum from Mexico last year. Mexico had also imposed retaliatory tariffs, mostly on farm and food goods, including apples, pork and cheese.

“The biggest hurdle to ratifying USMCA has been lifted,” said Sen. Chuck Grassley (R-Iowa), who as chairman of the Finance Committee will lead any Senate consideration of USMCA.

Business groups applauded the lifting of the steel and aluminum tariffs, which have raised costs for auto makers in the U.S. “This action delivers a welcome burst of momentum for the USMCA,” said Tom Donohue, president of the U.S. Chamber of Commerce.

The United Steelworkers Union also noted its approval. “From Day One, we made it clear that the real problem isn’t Canada or Mexico,” said union president Leo Gerard.

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."

Perspective: The lifting of the metals-related tariffs was seen as a necessity to get an eventual vote in the U.S. Congress on USMCA. But the time line on when an actual vote will take place is murky. The key to that is primarily up to House Speaker Nancy Pelosi (D-Calif.), who has said she and many Democrats have issues relative to labor and environmental language enforcement, particularly regarding Mexico. Democrats also want to rewrite drug-patent provisions. Pelosi is in no particular rush to give the president a major domestic policy victory, the New York Times reported, citing people familiar with her views. A growing number of lawmakers from both sides of the political aisle said they would not vote for USMCA unless the tariffs were lifted. A big hurdle has been lifted, but lobbying by the Trump administration and lawmakers supporting USMCA will now accelerate. The Trump administration aims to send paperwork to Congress soon, which could set up a vote on USMCA before lawmakers leave for the entire month of August, but some congressional sources say that time line appears optimistic. Also, this may not be the end of the metal tariffs. The metals deal allows the U.S. to re-impose the tariffs if either aluminum or steel imports “surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share,” according to the joint statement. Key is who defines meaningfully. Some note this could work out to be de-facto quotas on steel and aluminum imports, which means politically managed trade. Also, if tariffs are put back on, Canada and Mexico have agreed to confine any retaliation to steel and aluminum, rather than the array of products that previously included farm and other products.


 

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