December 3, 2018

“New NAFTA” Signed, But Canada, Mexico Still Press For End To Metals Tariffs

Last Friday, Canadian Prime Minister Justin Trudeau, U.S. President Donald Trump, and outgoing Mexican President Enrique Peña Nieto signed the U.S. Mexico Canada Agreement (USMCA) and while the three leaders celebrated the achievement, it was clear divisions remain regarding the Section 232 steel and aluminum tariffs put in place earlier this year by the U.S. government. Indeed, Prime Minister Trudeau used his remarks at the signing ceremony as a platform to discuss the matter, telling his American counterpart that the USMCA achievement “is all the more reason we need to keep working to remove the steel and aluminum tariffs between our countries.”

After the signing ceremony, Canadian Foreign Affairs Minister Chrystia Freeland amplified what her boss said, noting Canada does “not accept the legality of these tariffs.” She continued, “We have challenged and are continuing our legal challenges. We think this is simply wrong and frankly, we are very confident we are going to win those legal challenges.”

The three countries are still in talks to lift the penalties, but at this point, an agreement is not on the horizon. (Canadian Finance Minister Bill Morneau discussed the state of the negotiations in an interview last week with BloombergClick here to watch.) While U.S. Trade Representative Robert Lighthizer said he hopes the three countries will “come to a conclusion before long” he also cautioned that it is “difficult to put a timeframe on negotiations.” The United States continues to push for quotas in exchange for lifting the Section 232 tariffs, but Canada and Mexico have so far said they will not agree to that proposal.

Canadian officials, who imposed retaliatory tariffs of their own, have said they will lift their penalties once the Section 232 tariffs are eliminated.

The divisions between the Canadian and U.S. governments on the penalties were evident even in the names by which the countries’ two leaders used for the agreement. Prime Minister Trudeau called the agreement the “new NAFTA” while President Trump called it the USMCA.

Now that the agreement—whatever it’s referred to—is signed, it must be ratified and in the U.S. Congress at least, that feat will be a challenge. A few prominent lawmakers already have said they will vote against the deal as currently is written, including Sen. Elizabeth Warren (D-Mass.) who argued in a speech last week that USMCA does not do enough to prevent outsourcing, raise wages, or create jobs. Republican lawmakers, including Sens. Pat Toomey (R-Penn.) and Marco Rubio (R-Fla.) also have said they won’t support the USMCA in its current form either. According to Politico, at least three members of the U.S. House have signaled they will vote against the agreement. Connecting the Dots will continue to update readers on how negotiations with U.S. lawmakers are proceeding, but it is virtually certain there will be no vote on the USMCA in Congress before the end of the year.

Click here to read the White House’s fact sheet on the updated trade pact between the three countries and here to read the Industry Trade Advisory Committee (ITAC) reports on the USMCA.