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Trump agrees to lift steel tariffs on Canada and Mexico, boosting chances for trade accord

By Don Lee • Updated May 17, 2019 at 10:39 PM

WASHINGTON — President Donald Trump has agreed to lift tariffs on steel and aluminum from Canada and Mexico, relenting to congressional pressure to back off in order to boost the chances of winning approval for his newly negotiated North American trade pact.

“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.

The announcement came just hours after Trump delayed for up to six months his threat to impose new tariffs on imported autos and auto parts.

Taken together, the two moves seemed intended to deescalate tensions with allies as the administration intensifies its trade fight with China, which is the largest trading partner of the U.S.

“Today’s announcement is a big win for American agriculture and the economy as a whole,” U.S. Secretary of Agriculture Sonny Perdue said after the Section 232 Tariffs were removed from Canada and Mexico. “I thank President Trump for negotiating a great deal and for negotiating the removal of these tariffs. Canada and Mexico are two of our top three trading partners, and it is my expectation that they will immediately pull back their retaliatory tariffs against our agricultural products. Congress should move swiftly to ratify the USMCA so American farmers can begin to benefit from the agreement.”

For months, Trump had resisted advice from lawmakers and administration officials to remove the 25 percent duties on imported metals that he slapped on Canada, Mexico and other countries about a year ago. Trump wanted to keep protecting domestic steelmakers and help factory workers who are among his strongest supporters, and he saw the tariffs as leverage for getting better deals from trading partners.

But Canadian officials, and prominent Republican senators, had made clear that the revisions to NAFTA could not win approval of either Congress or the Canadian Parliament unless the tariffs were lifted.

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

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.

The U.S. imported about $14 billion of steel and aluminum from Canada last year. After the United States 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 two sides 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 to the U.S.

The two 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 decision to remove the tariffs was first reported by CNBC and The Washington Post.

The tariffs have boosted steel production and investments in the United States but also have hurt a much wider array of domestic companies that have struggled with higher metal prices and supply problems.

As a tactic in trade talks, administration officials and supporters say the tariffs have worked, at least in bringing parties to the table and, in Canada and Mexico’s case, in agreeing to revise NAFTA, one of Trump’s key campaign promises. Last fall, the three countries reached a deal on the newly named U.S.-Mexico-Canada Agreement.

Critics said Canada and Mexico were willing to negotiate changes to the NAFTA agreement and that the tariffs were not needed.

Canada is the United States’ largest steel and aluminum trading partner, and Ottawa retaliated with tariffs on U.S. steel products and other goods.

Trump’s tariffs on industrial metals were controversial from the start as he imposed them across the world, claiming that foreign imports of steel and aluminum threatened U.S. national security.

Canada and other allies regarded the tariffs as particularly repugnant, given their long, close relations and security alliances with the United States.

In the U.S., lawmakers in both parties criticized the tariffs as well, worried that they would hurt international relations and alienate partners at a time when Trump was undertaking a major trade struggle with China.

The new U.S. trade agreement with Canada and Mexico — which analysts and outside experts say include some significant but overall modest changes — needs to be ratified by Congress before it can take effect. Some senior Republican lawmakers insisted that they would not even take up the trade deal until the metal tariffs on Canada and Mexico were lifted.

Congressional Democrats, for their part, have said they would not support the agreement unless changes were made on labor enforcement and the duration of drug exclusivity rights.


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