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Trump steel tariff proposal roils Nafta talks

05 Mar 2018 22:18 GMT
Trump steel tariff proposal roils Nafta talks

Adds end of Nafta negotiating session in Mexico City.

Washington, 5 March (Argus) — US President Donald Trump's proposal to impose stiff tariffs on imported steel and aluminum has presented an unexpected challenge to negotiations on the North American Free Trade Agreement (Nafta).

Trump last week announced plans to impose a 25pc tariff on all steel imports and a 10pc tariff for aluminum. US negotiators expressed confidence before seventh round of Nafta talks between Canada, Mexico and the US — which concluded today in Mexico City — that the thorniest issues could eventually be overcome.

But Trump's unexpected proposal and subsequent statements have cast a pall over the negotiations. Trump this morning via Twitter suggested Canada and Mexico would be exempted from the new measures only if "new and fair" Nafta agreement is signed.

"We have large trade deficits with Mexico and Canada. Nafta, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs."

Industrial groups in Mexico already have asked the government to retaliate with similar measures against US exports. Mexico should not be included in steel and aluminum tariffs, Mexican economy minister Ildefonso Guajardo said following Trump's tweet. "It is the wrong way to incentivize the creation of a new & modern Nafta," Guajardo replied, also via Twitter.

Canada's foreign minister Chrystia Freeland said today at the close of the seventh round of Nafta negotiations that Canada would respond to US tariffs in kind.

"As the number one customer of American steel, Canada will view any restrictions on Canadian steel and aluminum as absolutely unacceptable," Freeland said. "Should restrictions be imposed on Canadian steel and aluminum products, Canada will take appropriate responsive measurements."

In the round, three new chapters of the agreement were closed: transparency, good regulatory practices and sanitary and phytosanitary measures, or measures related the plant and animal sanitation.

US trade representative Robert Lighthizer said the progress has been slow as "only six chapters out of 30 have been closed."

Mexico's economy minister, Ildefonso Guajardo said "in this round we grew 100pc as we only had closed three chapters in all rounds, and now, in just one, we closed another three."

The energy chapter along with the telecommunications, obstacles in trade, financial services, companies and State properties are also "a hand away from closing."

The exact details of the measures outlined by Trump are not clear. Trump's principal trade adviser Peter Navarro, an academic who opposes free trade and foreign investment, appears to have been behind the proposal.

Mexico and Canada were granted exemptions from steel tariffs imposed by the US in 2002 as it would have faced penalties under Nafta otherwise. But Navarro in a televised interview yesterday said no country would be exempt from the tariff proposal. "As soon as (Trump) starts exempting countries, he has to raise the tariff on everybody else. As soon as he exempts one country, his phone starts ringing from heads of state of other countries."

Some US lawmakers are proposing an exemption for Canada and other countries, suggesting that the administration focus its protectionist measures on China instead.

But Navarro said the approach would not work. "It is not a China problem. You cannot get from here to Beijing and solve this problem."

Trump promised to unveil the measure this week. But Navarro and commerce secretary Wilbur Ross said Trump's economic team is still working out details of the proposal.

US energy industry groups have expressed opposition. "Implementing this trade policy could create confusion in supply chains, unnecessary costs and impacts to US capital intensive projects, and threaten high-paying industry jobs," the American Petroleum Institute said.

The US energy industry also has urged the administration to preserve Nafta in its current form if modernization talks do not yield immediate results. Mexico is a growing market for US refiners and natural gas producers.