Donald Trump opens a regional safety valve as the trade conflict with China intensifies. The United States already has a pact with Mexico and Canada to lift the tariffs it activated last year against imports of steel and aluminum. It is a step that is considered essential for the ratification process of the new North American trade agreement, known under the acronym T-MEC, to go ahead. The customs tax was creating a problem for companies that need the two metals in their manufacturing processes. As part of the agreement, the Canadian and Mexican Executives agree to withdraw the litigation in the World Trade Organization (WTO) and the retaliation.
The Secretary of the Treasury of the United States, Steven Mnuchin, already announced last Tuesday that an understanding was very close and that the president had it as a priority. That same day, the Foreign Trade representative of the Trump Administration, Robert Lighthizer, presented the proposal to the Canadian Foreign Minister, Chrystia Freeland, in which the terms to dismantle the tariffs were set. Trump thus manages to close an important front and focus on negotiating with China, exerting more leverage.
The pact was closed by Donald Trump himself in a telephone conversation, this Friday, with the Prime Minister of Canada, Justin Trudeau. According to the joint statement setting out the main points of the agreement, the tariffs will be lifted within 48 hours. In exchange, measures will be taken to prevent Chinese steel and aluminum from entering the United States through Mexico and Canada. The imposition of quotas, as demanded by Mexico and Canada, will also be avoided.
On the Canadian side, Trudeau exhibited at an event at a factory owned by the Stelco steel company in the town of Hamilton (Ontario, a stone's throw from Toronto and near the US border). The tariffs are eliminated in exchange for an end to complaints in the WTO and the restrictions that were adopted in response are lifted. At the same time, a consultation mechanism is established to resolve disputes over imports of these products.
The United States chose to keep the 25% tariffs on steel and 10% on aluminum active despite the agreement between the three governments for the new trade agreement with Mexico and Canada. Trudeau, however, was very clear with Trump and warned him that he was being an obstacle in the ratification process: Canada was, however, the most at stake in this battle. Ottawa also rejected the application of quotas as a remedy to the dispute.
The truce with Mexico and Canada is announced on the same day that the United States decides to give six more months to negotiate with the European Union, to reach an agreement that avoids applying a 25% tariff on imports of vehicles and components for the automotive. In both cases, the Republican Administration resorted to protectionist action justifying national security reasons. But their action is not having the desired effect on the industry.
In a statement published hours after the US authorities made the agreement official, the Mexican Ministry of Economy confirmed it in a statement reaffirming its position to "guarantee productive integration in North America" and "congratulated" for a pact that "paves the way for the ratification of the T-MEC," reports Ignacio Fariza.
"It was recognized that the tariffs were hurting consumers and producers in both countries," said Trudeau. "It made no sense to keep them with the new agreement," added the Canadian prime minister while adding that the consultation mechanism seeks to prevent risks to domestic steel and aluminum, "we are going to work together to protect our workers and our industry." . He also indicated that it is a "great step to advance in the ratification of the new free trade agreement."
Tariffs began to be applied in March 2018 by looking at China, because excess production was depressing prices. The conversation between Prime Minister Trudeau and President Trump on Friday is the third in the last week and in which tariffs were at the center of the exchange. The escalation of the US tariff dispute with China, following the rise in tariffs a week ago, posed an additional problem.
This front with the North American partners has a domestic political derivative, which pitted members of their own party against it. Charles Grassey, Republican Senator from Iowa, He warned that he would not approve the new US trade agreement while the tariffs were still in place. In his case, he was affected by the trade retaliation measures that Mexico and Canada applied to agricultural products. The field is abuzz with votes before the presidential elections and suffers from the Chinese escalation. Democrats are pushing too.
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