Canada sees little chance of quick end to U.S. metals tariffs: sources

© Reuters. A worker walks by rolled up steel sits in the ArcelorMittal Dofasco steel plant in Hamilton, Ontario

By David Ljunggren

OTTAWA (Reuters) - Canada does not hold out much hope that Washington will quickly lift tariffs that it imposed on steel and aluminum exports and is resisting a U.S. push to agree to strict quotas, two sources familiar with the matter said.

The administration of U.S. President Donald Trump imposed the sanctions on Canada and Mexico in June, citing national security reasons. Although Canada and Mexico agreed a renewed continental trade deal last week, the measures remain in place.

Canada is the single largest supplier of both aluminum and steel to the United States. Washington worries that nations could try to ship supplies through Canada and pretend the metals had been produced in Canadian facilities.

In a bid to address those concerns the Canadian government - acting on a promise it made in March - on Thursday said it would impose new quotas and tariffs on imports of seven categories of steel from many countries to head off a potential rise in imports.

A tariff of 25 percent will apply starting Oct. 25, 2018 to imports "in cases where the level of imports from trading partners exceeds historical norms", a government statement said.

Mexico, one of the countries targeted by the new measures, said on Thursday it "lamented" Ottawa's decision and would seek to have its exporters' steel products excluded from the trade protections.

Jerry Dias, head of Unifor, Canada's largest private sector union, said the safeguards would keep out subsidized steel from China and South Korea.

"It's also sending a message to the United States," he said in an interview. "Now that the issue is resolved, there's no meaningful reason for the U.S. to continue to punish the steel industry on both sides of the border."

The government of Canadian Prime Minister Justin Trudeau is pessimistic about the chances of the U.S. tariffs being removed soon, said the sources, who asked to remain anonymous, given the sensitivity of the situation.

In March, the United States signed a deal with Seoul whereby in exchange for an end to steel tariffs, South Korea agreed to cut exports by 30 percent of the past three years' average.

During talks on the new United States-Mexico-Canada Agreement (USMCA), U.S. officials told Canada they wanted a similar arrangement for steel and aluminum, one source said, declining to give specific details.

Canada rejected the demand and made clear any cap on the metals would have be at a level higher than current exports to allow room for shipments to grow.

The source noted the USMCA stipulates that if Washington imposes autos tariffs on national security grounds, Canada would get a tariff-free passenger vehicle quota of 2.6 million units. This is well above current export levels.

Two other sources directly familiar with the talks on metal quotas between Washington and Ottawa said the export limit the United States sought on aluminum would have caused investment in the industry to plunge.

"It was so unacceptable that the discussions just ended before they began," said one source.

Trudeau, who tried and failed to have the punitive measures removed before the USMCA negotiations ended on Sept. 30, said last week he was pressing Washington hard to remove the tariffs. The United States, Mexico and Canada are due to sign the USMCA at the end of November.

The office of Canadian Foreign Minister Chrystia Freeland, who is charge of relations with the United States, did not respond to a request for comment.