High Tariffs on Steel and Aluminum on Canada, Mexico and EU
As of midnight May 31, 2018, Canada will have to pay heavy tariffs on steel and aluminum imports to the United States, in the latest salvo of the Trump administration’s trade dispute over the North America Free Trade Agreement or NAFTA and with European Union. The tariffs will be 25 percent on steel and 10 percent on aluminum, U.S. Commerce Secretary Wilbur Ross said Thursday. He cited the fact that talks on the new North American free-trade agreement are “taking longer than we had hoped.”
The tariffs have been carried out under a legal measure that revolves around protecting America’s national security, with the Trump administration arguing that imports have weakened the industrial base that allows the country to manufacture tanks, weapons and armored vehicles. Mr. Ross defended the principle on Thursday, saying, “We take the view that without a strong economy, you can’t have strong national security.” The European Union and Canada have objected strongly to the use of the national security argument, citing their close alliance and defense agreements with the United States. On Wednesday, Chrystia Freeland, Canada’s Foreign Minister called the idea that metal imports from her country would threaten American national security “frankly absurd.”
Mexico struck back immediately with tariffs on U.S. steel and farm goods, with the European Union promising measures of its own. Canada has prepared a retaliation plan against U.S. steel, aluminum and potentially other products, but has not yet made an announcement. Mexico responded to U.S. steel and aluminum tariffs by imposing wide-ranging “equivalent” measures on farm and industrial products, the economy ministry said on Thursday, ratcheting up tensions during talks to renegotiate NAFTA. The Mexican measures, which target pork legs, apples, grapes and cheeses as well as steel, could hit farm states that are a bastion of support for U.S. President Donald Trump, ahead of American midterm elections in November.
The Mexican measures will be in place until the U.S. government eliminates its tariffs, the ministry said. “Mexico profoundly regrets and condemns the decision by the United States to impose these tariffs on imports of steel and aluminum from Mexico,” the Ministry said. “Mexico reiterates its openness to constructive dialogue with the United States, its support for the international commerce system and its rejection of unilateral protectionist measures,” it said. Mexico buys more steel and aluminum from the United States than it sells. It is the top buyer of U.S. aluminum and the second buyer of U.S. steel, the economy ministry said. The countermeasures will hit U.S. hot and cold rolled steel, plated steel and tubes, the ministry said.
The European Union will impose countermeasures after the United States decided to no longer exempt it from steel and aluminum tariffs, the head of the bloc’s executive Jean-Claude Juncker said on Thursday. “This is a bad day for world trade,” Juncker said in a speech in Brussels. “So we will immediately introduce a settlement dispute with the WTO and will announce counterbalancing measures in the coming hours.” “It is totally unacceptable that a country is imposing unilateral measures when it comes to world trade.”
The United States, Canada, and Mexico have been renegotiating the NAFTA, which governs trade between the three countries. Last week, the Trump administration also announced it was launching a similar national security investigation into imports of automobiles, a market many times as large as steel and aluminum. The vast majority of American automobile imports come from Canada, Mexico, the European Union, South Korea and Japan. That review could take months, ramping up pressure on Mexico, Canada, and other U.S. trading partners. “Rules of origin” for auto manufacturing remain one of the most contentious parts of the new NAFTA. Mexico is opposed to U.S. demands to make auto companies source 40 to 45 percent of content from factories that pay US$15 an hour. Mexico’s workers earn an average of about US$4 an hour, and the Mexican negotiators fear the U.S. wage measures would favor American and Canadian manufacturers.
Contribution Magdalena A K Muir
Sources
https://www.theglobeandmail.com/politics/article-nafta-explainer-trump-canada-mexico-trudeau/
https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html