President Enrique Peña Nieto, US President Donald Trump and Canadian Prime Minister Justin Trudeau are expected to sign the newly accorded USMCA by the end of November. However, the undefined matter of tariffs on steel and aluminum remains. The situation has become even more complicated with new demands from the US and measures taken by Canada to protect its own industry.
Even after reaching an agreement on USMCA, Trump did not back down on the imposed tariffs on steel and aluminum that he set with the goal of speeding up NAFTA negotiations. Mexico and Canada expected that after the settlement, tariffs would go away once and for all. Far from that, Trump’s government is now bringing new demands to the table.
According to Chief Negotiator from Andrés Manuel López Obrador’s incoming administration Jesús Seade, the US is now looking to establish quotas on steel exports from Mexico and Canada in order to lift tariffs. “I have had a couple of calls with (Robert) Lighthizer and it is along those lines, to manage volumes … with Mexico and with Canada,” he said in an interview with Reuters. The US recently reached an agreement with South Korea cutting their exports to the US by 30 percent and the negotiations appear to be moving to that same end.
Seade said that the matter must be resolved before the new administration enters office in order for Peña Nieto to sign the agreement on November 30 and send it to ratification with the Senate. Reuters reports the matter is still in the air. However, a new factor has come into play.
On October 11, Canada announced its decision to impose its own 25 percent tariffs on seven kinds of steel product imports beginning October 25. This measure was enforced to protect the country from the diversion of steel caused by the current trade war caused by the US. Canada exempted the US, Chile and Israel from these tariffs but Mexico is only partially exempted.
The new tariff will last for 200 days while the Canadian International Trade Tribunal determines if it is necessary to make this a permanent measure. Minister of Economy Ildefonso Guajardo has already spoken against Canada’s decision and is looking to appeal for a full exemption just as the US. “Mexico deeply regrets the decision announced by the Canadian government to establish safeguards to certain families of steel products, which will affect Mexican exports of energy tubular products and wire rod,” he said.
On Monday, Guajardo approached the Canadian Minister of Foreign Affairs Chrystia Freeland to discuss the matter and its implications in the signing of USMCA. Although he is positive an agreement can be reached leading to a full exemption for Mexico, the possibility of retaliatory measures is not discarded. This would be a first between Mexico and Canada according to S&P but necessary according to Guajardo. “The decision of Canadians affects the regional integration of the North American steel industry,” he says.
The data used in this article was sourced from Forbes, El Financiero, Reuters and S&P Global.