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U.S. Tariff Moves Jolt Nafta Talks Publication info: Dow Jones Institutional News ; New York [New York]31 May 2018.

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FULL TEXT The Trump administration’s decision to impose steel and aluminum tariffs against allies Canada and Mexico

throws the latest wrench into talks to renegotiate the North American Free Trade Agreement, which started last

year and had already hit roadblocks in May.

Rather than forcing Canada and Mexico into concessions on Nafta, analysts say, the tariff move is likely to

strengthen Canada’s and Mexico’s resolve to not back down on unconventional U.S. demands for Nafta, such as

the elimination of international panels to resolve trade disputes and a new clause under which the pact would

expire if not explicitly renewed every five years.

The U.S. “may see this as a cost-free way of applying additional pressure. But the result will be the opposite,” said

Gordon Ritchie, a former Canadian ambassador for trade negotiations.

He and other analysts say the tariffs put further trade-pact negotiations against a backdrop of ill-will and a

widespread trade skirmish, none of which bodes well for a resolution to the Nafta stalemate.

Following the tariff news, tensions immediately flared among the trading partners, with Canadian Prime Minister

Justin Trudeau blasting the move as “totally unacceptable” and Canada and Mexico promptly striking back with

their own retaliatory measures.

Initially, steel and aluminum exemptions had been granted to Canada and Mexico, conditional on Nafta progress.

But negotiators from the three countries missed an informal deadline in mid-May to reach a deal in time for the

U.S. Congress to vote on it before legislators elected in November take office next year.

Talks have been “taking longer than we had hoped,” Commerce Secretary Wilbur Ross said as he announced the

tariffs on Nafta partners.

Late Thursday, President Donald Trump said of the Nafta deal, “The United States has been taken advantage of for

many decades on trade. Those days are over.” He added that the U.S. would “agree to a fair deal, or there will be no

deal at all.”

Canada’s Foreign Minister Chrystia Freeland said Thursday that the tariffs actually violate Nafta and World Trade

Organization rules, and that the country planned to begin trade litigation.

Before the tariff announcement, Mr. Trudeau said he had offered to travel to Washington to meet with Mr. Trump

and complete a Nafta pact because he believed the outlines of a deal were in place. He said he was told Canada

would need to agree to a sunset clause—a provision that would end the deal every five years unless explicitly

renewed. That was a condition Mr. Trudeau told Vice President Mike Pence in a Tuesday phone call he would not

accept.

Less than 48 hours later, the U.S. said Canada and Mexico would face tariffs on their steel and aluminum.

Mexican President Enrique Peña Nieto and Mr. Trudeau spoke by phone Thursday and discussed their rejection of

the tariffs and the retaliatory measures they planned. Despite the pall now cast over the talks, they both expressed

commitment to a successful renegotiation of Nafta, Mexico’s presidential press office said.

Ildefonso Guajardo, Mexico’s economy minister and chief trade negotiator, said the tariff decision led to tension in

conversations with U.S. Trade Representative Robert Lighthizer and Mr. Ross, but that talks are continuing.

Canada and Mexico are the top two export destinations for U.S. steel.

“This is totally incomprehensible, above all when in the steel market, we buy more from them than we sell to them,”

Mr. Guajardo told Mexico’s Radio Centro station on Thursday.

Mexico had a $3.6 billion deficit in steel trade with the U.S. in the past two years. Citing U.S. data, Canada said it

ran a deficit in steel last year of $2.06 billion with the U.S.

A key importer of steel is the Mexican auto industry, which is at the center of contention in Nafta negotiations as

the U.S. seeks to increase its national content in cars built in the region.

As talks ran into hurdles in May, the Trump administration also said it was going to investigate auto imports with a

view to eventually imposing import tariffs.

Mexico said its response to the steel tariffs would target a variety of U.S. goods, including steel products, lamps,

berries, grapes, apples, cold cuts, pork and various cheeses, “up to an amount comparable to the level of damage”

from the U.S. steel tariffs.

Canada will impose a 25% tariff on steel imports from the U.S. and a 10% tariff on aluminum and a wide range of

other U.S. goods, including some food and household products.

The total value of the imports on the list is 16.6 billion Canadian dollars ($12.8 billion), according to the Canadian

government, which says that amount represents the value in 2017 of Canadian exports affected by the U.S. tariffs

on steel and aluminum.

Mr. Trudeau said the Trump administration’s move, and the ensuing fallout, would be “more significant” than it

realizes.

Despite the harsh rhetoric, a successful Nafta negotiation is important for Mr. Trudeau, since it represents an

important gauge of his ability to manage the Canadian economy, heavily reliant on selling goods to the U.S. He

faces an election test in the fall of 2019, and he has now slipped in recent polls after an extended honeymoon.

Eric Miller, a former Canadian official and now head of Washington-based Rideau Potomac Strategy Group, doesn’t

believe talks will fall apart but said the tariffs do put the trade-dependent economy “in a difficult situation.”

Mark Warner, a Toronto-based trade lawyer who has been closely following Nafta, took a more pessimistic view,

given the newly fraught relations between the U.S. and its partners.

“I think the Nafta termination notice clock is inching closer to midnight,” he said.

Write to Paul Vieira at [email protected], Kim Mackrael at [email protected] and Anthony Harrup at

[email protected]

(END)

May 31, 2018 21:30 ET (01:30 GMT) DETAILS

Subject: North American Free Trade Agreement; International trade; Tariffs; Aluminum; Steel

industry

Location: Mexico United States--US Canada

People: Lighthizer, Robert Trump, Donald J Ross, Wilbur L Jr Trudeau, Justin Pence, Mike

Guajardo, Ildefonso

Company / organization: Name: Congress; NAICS: 921120; Name: World Trade Organization; NAICS: 928120

Publication title: Dow Jones Institutional News; New York

Publication year: 2018

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Publication date: May 31, 2018

Publisher: Dow Jones &Company Inc

Place of publication: New York

Country of publication: United States, New York

Publication subject: Business And Economics

Source type: Wire Feeds

Language of publication: English

Document type: News

ProQuest document ID: 2047669048

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Copyright: Copyright Dow Jones &Company Inc May 31, 2018

Last updated: 2018-06-01

Database: Global Newsstream