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U.S. Close to Deal With Canada, Mexico to End Steel and Aluminum Tariffs

The Trump administration is close to reaching a deal with Canada and Mexico that could end U.S.-imposed tariffs on steel and aluminum imports, according to two administration officials, potentially removing a major barrier to the three countries’ trade pact.

The U.S. trade representative, Robert Lighthizer, has been in talks to lift the tariffs, which have threatened the congressional passage of President Trump’s revamped trade deal with Canada and Mexico, the two officials said. Many lawmakers believe the tariffs, which the Trump administration says were necessary to protect America’s national security interests, undermined the alliance with the country’s two neighbors.

One of the officials wouldn’t put a timeline on whether a deal was imminent on Friday, but said, “we’re close.”

The official added that the administration is working closely with Canadian and Mexican negotiators with an eye toward getting the U.S.-Mexico-Canada Agreement, or USMCA, passed. Key Republican lawmakers have signaled they won’t vote for the USMCA deal, which needs congressional approval to take effect, unless the steel and aluminum tariffs against Canada and Mexico were removed.

A Canadian official said talks between Canada and the U.S. had moved forward and a deal could be announced as early as Friday afternoon.

The official said Canada had already taken steps to prevent cheap foreign steel from entering its market and would continue to do so after tariffs are lifted. Part of the U.S. rationale for its tariffs was that China dumped low-priced steel on the global market and this glut of the metal would slip into North America through Canada or Mexico if they weren’t subject to tariffs as well as China.

The person said Canada’s expectation was that the metals tariffs would be lifted first, and that would remove an impediment that has so far made it difficult for Canada to ratify the new USMCA trade deal. Canada would also immediately lift its retaliatory tariffs on the U.S. once the U.S. metals tariffs are ended, the person said.

Earlier this week, Treasury Secretary Steven Mnuchin said the administration was making progress resolving the tariffs. “I think we are close to an understanding with Mexico and Canada” on resolving the steel and aluminum tariffs, Mr. Mnuchin said, adding resolving the tariffs is “a very important part of passing USMCA.”

The USMCA was agreed to by the three nations last year, and signed by their leaders in November. But the agreement still needs ratification from all three nations’ legislatures to take effect.

At the time of reaching that broad trade deal, the countries hadn’t resolved the issue of the 25% tariffs on steel and 10% tariffs on aluminum that the administration imposed last May, nor the retaliatory tariffs Canada and Mexico imposed in response, including on many agricultural goods.

Key senators, including Iowa Republican Chuck Grassley, chairman of the Senate Finance Committee, has said the pact can’t advance through Congress if the tariffs aren’t removed.

While the tariffs have helped sectors of the U.S. steel and aluminum industries, they sharply raised prices for businesses that use steel and aluminum.

Among the most affected were auto makers and their suppliers, which accounted for 27% of the 110 million tons of steel used by U.S. businesses in 2017, according to the American Iron & Steel Institute.

Although most of that steel was American-made, the car industry is still paying more because the tariffs also prompted domestic steelmakers to raise prices by 25% this year.

While a deal to remove the tariffs would remove one hurdle for the USMCA, other challenges remain. Democrats in the House have signaled they won’t allow a vote on the pact unless worker protections in it are strengthened.
Source: Dow Jones

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