President Trump Ties Steel Tariff Exemptions for Canada, Mexico to NAFTA Renegotiation – Negotiating Style May Already Be Paying Off

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President Trump wrote today on Twitter that exemptions for Canada and Mexico on steel and aluminum imports would be granted only if a more equitable version of NAFTA, the North American Free Trade Association is signed between the three countries.

“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,” the President wrote this morning.

Trump announced last week that the U.S. would be imposing tariffs of 25% and 10% and steel and aluminum imports respectively, coming in from foreign countries, including Canada and Mexico.

The Canadian and Mexican governments, as well as some U.S.-based unions have asked Trump administration to grant waivers for the countries for any proposed tariffs.

“We will continue to engage with all levels of the American administration in the coming days so that they understand that this proposal is unacceptable,” Canadian Prime Minister Justin Trudeau said at an event last week.

Mexico has also asked for exclusion from the sanctions and has said it will have “no option” but to retaliate if one is not granted.

In the case of Canada, some U.S. labor unions are also in favor of exemptions.  “Canada is not the problem. The United States and Canada have integrated manufacturing markets and our union represents trade-impacted workers in both nations,” Leo Gerard, President of the United Steelworkers International Union, wrote in a statement emailed to ITN.

“In addition, the defense and intelligence relationship between the countries is unique and integral to our security. Any solution must exempt Canadian production,” he added.

The steel and aluminum tariffs were hastily announced last Thursday with top aides unsure as late as that afternoon whether the President would actually announce them.  He reportedly gave aides less than 24 hours’ notice to prepare for the event.

Administration officials have said that they need more time (as many as several weeks), to turn Department of Commerce recommendations into a policy directive the President can sign.  The Commerce Department issued a finding earlier this month that warned that rising imports of steel and aluminum threatened U.S. national security.

The President has now tied the steel and aluminum tariffs to NAFTA, which at the demands of Trump is currently being renegotiated between the three member-countries.  The latest round, the seventh, just concluded in Mexico City.

An interesting byproduct of the uncertainty surrounding any new NAFTA agreement, and even whether the United States remains a party to one, is that many corporations are choosing to make any major new investments in the U.S.

Last month, Chrysler announced it would be spending $1 billion to modernize a Michigan plant with the goal of bringing 2,500 automobile manufacturing jobs back to Warren, Michigan, the town where the plant is located.  The company will be relocating production of one of its most profitable truck lines, the Ram heavy duty pickup truck, from Saltillo, Mexico, to Michigan.

Chrysler quietly acknowledges that the move was an effort to hedge and narrow its exposure to any drastic changes in made in the NAFTA agreement.

 

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