President Donald Trump’s plan to slap steep tariffs on steel and aluminum imports isn’t just a way to prop up domestic producers – it’s also leverage he’s planning to use to get Canada and Mexico to agree to U.S. demands in the ongoing negotiations to rewrite the North American Free Trade Agreement.
Trump today signed the order to levy a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, but he promised they would not apply to Canada or Mexico if a new NAFTA was agreed to.
“We’ve got a lot of flexibility built into the tariffs,” Ag Secretary Sonny Perdue said after a meeting this morning in the White House. “We’re going to use this to get NAFTA done.”
The steel and aluminum tariffs are predicated on a threat to U.S. national security, and Trump pulled NAFTA into that rationale to explain the exemptions for Canada and Mexico.
“National security is a very important aspect of (NAFTA),” Trump said. “And if we’re making the deal on NAFTA, this will figure into the deal and we won’t have the tariffs on Canada or Mexico.”
Canada and Mexico both stand to lose a lot if the U.S. were to hit them with the tariffs. Canada is the largest foreign supplier of steel and aluminum to the U.S., according to Commerce Department data. Mexico is the fourth-largest supplier of steel and the 10th largest supplier of aluminum.
The U.S., Canada, and Mexico just wrapped up their seventh round of NAFTA talks in Mexico City. Some progress was made on non-controversial issues like sanitary and phytosanitary standards, but virtually no progress was made on controversial topics such as U.S. demands that Canada dismantle its dairy supply management system.
U.S. Trade Representative Robert Lighthizer on Monday expressed frustration at the lack of progress. And today promised, "We either make a deal or we terminate. And if we do (make a deal) there won’t be any tariffs on Canada and Mexico.”
Farm groups are extremely worried about the tariffs because of the potential backlash against the U.S. agricultural exports, which are often targeted by foreign countries in reaction to U.S. trade actions.
“We expect that these tariffs will cause retaliation that will come out of the pockets of American farmers,” the umbrella group Farmers for Free Trade said in reaction to the finalization of the tariffs. “History shows that these types of tariff fights escalate with our trading partners and result in farmers paying the price in the form of higher tariffs on the products we export. We’ll also see the price of ag equipment and inputs increase.”
Steel is a major cost in the production of tractors and other farm equipment and those costs are already going up, according to the Association of Equipment Manufacturers (AEM).
“These ‘Trump Tariffs’ will put U.S. equipment manufacturers at a competitive disadvantage, risk undoing the strides our economy has made due to tax reform, and ultimately pose a threat to American workers’ jobs,” said AEM President Dennis Slater.
Trump did not mention by name European or Asian countries that are U.S. allies and major steel exporters, but he did say that the U.S. would be open to negotiating with them.
“If the same goals can be accomplished by other means, America will be open to modifying or removing the tariffs for individual nations as long as we can agree on a way to ensure that their products no longer threaten our security,” Trump said. “The tariffs don’t go into effect for at least another 15 days and we’re going to see who is treating us fairly and who is not treating us fairly.”
He said Lighthizer will be in charge of those negotiations.
“I will work closely with other Cabinet officials to advise the President on how to implement the program on steel and aluminum that he announced today,” Lighthizer said.
Trump signed off on the steel and aluminum tariffs over the objection of many Republican lawmakers, including Senate Agriculture Committee Chairman Pat Roberts.
“This proposal is not a tariff on steel and aluminum imports; it is a tax on consumers,” said Roberts. “As we have seen in past cases of increased tariffs, higher manufacturing costs will inevitably be passed down the supply chain, forcing consumers to bear these costs … Like we have seen in the past, American agriculture often pays the price. We need a trade policy that is stable and beneficial to all industries.”
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