Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. lifts tariffs on Canadian, Mexican metals in boost for trade pact

Published 05/17/2019, 09:20 PM
Updated 05/17/2019, 09:20 PM
© Reuters. Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan

© Reuters. Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan

By David Lawder and Steve Scherer

WASHINGTON/OTTAWA (Reuters) - The United States struck deals on Friday to lift tariffs on steel and aluminum imports from Canada and Mexico, the three governments said, removing a major obstacle to legislative approval of a new North American trade pact.

The separate agreements, which will not impose U.S. quotas on Canadian and Mexican metals shipments, will also eliminate Mexican and Canadian retaliatory tariffs on a broad range of U.S. products, including pork, beef and bourbon.

The United States and Canada said their agreement will be implemented by Sunday afternoon, and includes new curbs aimed at preventing dumped steel and aluminum from China and other countries from entering the U.S. market via Canada.

President Donald Trump had imposed the global "Section 232" tariffs of 25% on steel and 10% on aluminum in March 2018 on national security grounds, invoking a 1962 Cold War-era trade law.

Both Canada and Mexico argued for 14 months that their metals industries posed no security threat as their economies are integrated with the United States, and challenged the tariffs before the World Trade Organization.

"This is just pure good news for Canadians," Canadian Prime Minister Justin Trudeau told reporters after announcing the deal to workers at Stelco Holdings Inc's steel mill in Hamilton, Ontario.

Stelco shares soared 11 percent on the news, while top U.S. steelmaker Nucor (NYSE:NUE) fell 3.1 percent and U.S. Steel Corp, which had seen massive profit improvement because of the tariffs, fell 1.2 percent.

Spokesmen for U.S. Steel and Nucor, which had advocated for maintaining strong tariff protections, could not be reached for comment.

TRADE DEAL VOTE

The metals tariffs were a major irritant for Canada and Mexico and had caused them to halt progress toward ratification the new U.S.-Mexico-Canada Agreement, the trilateral trade deal to replace the 25-year-old North American Free Trade Agreement.

U.S. lawmakers with constituents suffering from Canadian and Mexican retaliation, including Senate Finance Committee Chairman Chuck Grassley, also said they would not consider a USMCA vote with the tariffs in place.

After the deal, Grassley tweeted: "Thank u Mr President for really helping the farmers of Iowa w this important step in USMCA. w lifting metal tariffs @realdonaldtrump just proved he can deliver on negotiations. China ought to take note/start dealing in good faith & take Pres Trump seriously."

Trudeau said Canada would now work with the United States on the timing of USMCA ratification and said he was optimistic Canada would be "be able to move forward well in the coming weeks".

U.S. Vice President Mike Pence said he would meet with Trudeau in Ottawa on May 30 to discuss "advancing" ratification.

Several U.S. Democrats applauded removal of the tariffs, but said USMCA was not yet ready for their support.

"When it comes to the new agreement, House Democrats continue to have a number of substantial concerns related to labor, environment, enforcement, and access to affordable medicines provisions. Those issues still need to be remedied," said House Ways and Means Committee Chairman Richard Neal.

Neal added that the deal does not address global steel overcapacity and criticized Trump's handling of trade negotiations with China, which deteriorated significantly in the last two weeks.

Trump, speaking to realtors in Washington, called the pact "a fantastic deal for our country" and said Congress would hopefully approve the USMCA quickly. "Then the great farmers and manufacturers and steel plants will make our economy even more successful than it already is."

Jesus Seade, Mexico's deputy foreign minister for North America, said the deal "measurably increases the probability" the USMCA will be approved before the U.S. Congress' summer break in August. Some U.S. lawmakers say passage would become more difficult after the recess due to budget battles expected in the fall and increased 2020 presidential campaign activity.

TRANSSHIPMENTS, SURGES

Trump's metals tariffs have been largely aimed at keeping excess production from China out of the U.S. market, and the deal includes a new monitoring mechanism aimed at preventing steel and aluminum from China and other countries from being transshipped through Canada and Mexico to the United States.

But the U.S. Trade Representative's office also said the deal allows it to reimpose tariffs in the event of "surges" in imports of specific steel products. If tariffs are reimposed, retaliation would be limited to the steel and aluminum sectors.

Carmakers, which have announced hundreds of millions of dollars in higher U.S. costs due to the tariffs, praised the deal and said it brought USMCA passage a big step closer.

"While many automakers already source the vast majority of their steel and aluminum domestically, tariffs drive those prices up which decreases investment and harms auto workers and ultimately consumers," said the Alliance of Automobile Manufacturers, a trade group representing most major brands including General Motors Co (NYSE:GM), Toyota Motor Corp Volkswagen (DE:VOWG_p) AG and others.

© Reuters. Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan

The National Pork Producers Council, which says retaliatory tariffs have cost its members $12 per animal, or a total of $1.5 billion, also expressed relief at the end of "a trade dispute that has placed enormous financial strain on American pork producers."

Latest comments

Donnie imposed tariffs on steel & aluminum on national security grounds... now after failing so badly to get any country to bend to his whims & fancy, he reversed the tariff. If the tariif is really to protect from  threat to national security why remove the tariff? ...Pretty clear to everybody it is all a lie from Donnie... ridiculous to call it threat to national security in the first place. The whole drama just to make Donnie looks tough & good to his supporters. Victimizing American consumers & farmers in the process.
bully donnie lies a lot
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.