Trump had not previously linked the steel and aluminum
tariffs, which he announced on Thursday, with
NAFTA, which has been under renegotiation since August.
WASHINGTON—Rejecting
Canada’s plea for an immediate exemption from his looming steel and aluminum tariffs, U.S. President
Donald Trump says he’ll only lift the tariffs if Canada agrees to a “fair” new North American Free Trade Agreement.
“We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed,” he wrote on Twitter on Monday morning.
He continued: “Also, Canada must treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.”
Trump had not previously linked the steel and aluminum tariffs, which he announced on Thursday, to the fate of NAFTA, which has been under renegotiation since August.
His decision to do so raised eyebrows among trade advocates, who noted that the official justification for the tariffs is that the current steel and aluminum situation threatens U.S. “national security” and that Trump’s unofficial economic justification has centred on what he calls unfair practices by China.
Even before Trump’s tweets, the announcement of tariffs had already complicated the NAFTA negotiations.
Jerry Dias, president of the Unifor union, which represents Canadian auto workers, said last week that the Canadian team in Mexico City was “absolutely furious,” and he demanded that Canada walk away from the talks if the U.S. went ahead with the tariffs.
Robert Fisher, a U.S. negotiator in the original NAFTA talks and now managing director of Hills and Co., said Canada would be best to keep plugging along, separating the tariff issue from its NAFTA posture.
“If the U.S. wants to tie any exclusions to concluding NAFTA, so be it. But it’s not in Canada’s interest or Mexico’s interest, I think, however tempting it might be in terms of immediate gratification, to say ‘enough is enough’ and walk away. Both countries and frankly the U.S. have too much to lose if NAFTA renegotiations fail,” Fisher said.
Trump’s steel threat comes as NAFTA negotiators attempt to resolve a difficult impasse over trade rules governing the auto industry — which happens to be a major user of steel. Fisher said it would be unwise for Canada to link the two in negotiations that are already complicated.
“I think the best approach would be to deal with the auto issue as the auto issue and the steel issue as the steel issue,” he said. “If you tie enough string together, sooner or later you end up with a Gordian knot that no one can untie.”
Lawrence Herman, a Canadian trade lawyer, said Trump’s threat “can’t help but hurt the negotiations.”
“It throws everything into turmoil. You can’t settle an already tense and complex set of NAFTA auto issues when exports of Canadian hot-rolled steel — a major part of vehicle production — are caught up in this latest bit of Trump unilateralism,” Herman said.
It is possible to take an optimistic view of Trump’s tweets. This was the first time he had floated the possibility of an exemption from the tariffs for any reason.
The U.S. actually has a trade surplus with Canada, not a deficit. Trump’s hand-picked Council of Economic Advisers pointed this out in their annual report in late February. Trump, though, ignores trade in services, in which the U.S. has a large surplus, and talks only about trade in goods, in which the U.S. has a smaller deficit.
Canada has promised to retaliate if it is not exempted from the tariffs, calling them “absolutely unacceptable.” Canada was exempted from the steel tariffs imposed by another Republican, George W. Bush, in 2002. Foreign Affairs Minister Chrystia Freeland says Trump’s national security justification is “entirely inappropriate” when applied to such a close ally.
Trump has issued a variety of threats over the course of the NAFTA talks. Freeland has dismissed them as an inevitable part of any negotiation.
Trump has said the steel tariff will be 25 per cent, the aluminum tariff 10 per cent. He has not released additional details, such as the time frame for the tariffs or the list of countries and particular products to which they will be applied.
Countries around the world have been furiously lobbying for exemptions since Trump made the announcement. Canada’s case for special treatment has received the most attention in the U.S., with Republican lawmakers, pundits and the United Steelworkers union saying Canada should not be punished.
Trump’s most pro-tariff adviser, Peter Navarro, made the rounds of U.S. television shows on Sunday. He rejected the idea of an exemption for Canada, telling CNN: “If you exempt Canada, then you have to put big, big tariffs on everybody else. So this is a measured, targeted approach.’’