A new deal may be on the horizon for Mexico, Canada and the US but that will not stop US President Donald Trump from imposing and maintaining existing tariffs related to national security threats. The matter is still to be resolved as the countries move forward with the new USMCA treaty.
Moving along with the NAFTA negotiations was the main motivation for the US slapping tariffs on Mexican and Canadian steel and aluminum imports of 25 and 10 percent, respectively. At least, that is what President Trump said when on June 1 he lifted the exemption that protected both countries from the US’ national security probe established on March 8. However, when several members of the press addressed the issue during his press conference to announce the newly agreed USMCA, Trump said these were two separate matters that would have to be resolved independently.
“Does this mean the end of tariffs, if you could spell that out, for Canada?” asked one of the journalists at the conference. Trump’s response was an adamant no. “Steel is staying where it is, and aluminum. But it means we probably, for the most part, won’t be having to use tariffs unless we’re unable to make a deal with a country.” This would seem to address the same issue with countries outside the North American region, but a Mexican journalist picked up the question specifically asking about Canada and Mexico leading to a vague answer from the US President.
“Until such time as we can do something that would be different – like quotas, perhaps – so that our industry is protected. We are not going to allow our steel industry to disappear. That wasn’t part of this but we will do something.” Chief Negotiator and US Trade Representative Robert Lighthizer also addressed the issue on Trump’s request, saying that both issues were separate for the US government and that those matters were still on the discussion table. “Hopefully we’ll be able to work that out,” he said.
Lighthizer might have said the two matters were separate but during his speech minutes before, Trump referred to tariffs as one of the main reasons why an agreement was reached. “Without tariffs, we wouldn’t be talking about a deal, just for those babies out there that keep talking about tariffs. That includes Congress,” he said. “Without tariffs, we wouldn’t be standing here.” Unfortunately, among those tariffs is the potential threat resulting from a second national security probe issued on May 23 against vehicle imports to the US. The results of this investigation are still to be revealed but they could lead to a tariff of up to 25 percent on all vehicle imports in the US.
When the United States-Mexico Trade Agreement was announced on August 27, Mexican negotiators assured investors that measures were taken against the threat of potential tariffs. A parallel letter was added to the documents on the negotiation where it was stated that Mexico and Canada would be exempt from any measures the US could take under the banner of national security, at least to a certain extent. This insurance remained in the negotiation of USMCA but it was modified to establish a limit of 2.6 million tax-free vehicle exports from Mexico or Canada to the US should national security tariffs were implemented. In auto parts, Mexico would work under a limit of US$108 billion in production while Canada’s exports would be capped at US$32.4 billion.
The private sector is still waiting for more details on the details and specifics of this letter of insurance, plus an announcement on the elimination of tariffs on steel and aluminum later in the week. Meanwhile, Minister of Economy Ildefonso Guajardo has said the plan is to reach an agreement regarding steel and aluminum before signing the new USMCA. “It does not make any sense, how are we going to reach an agreement with tariffs?” he said.
The data used in this article was sourced from The White House, CBC News and El Economista.