US in talks with Canada, Mexico on tariffs: Update

Adds comments from Nucor.

The Trump administration opened the door to lifting tariffs on steel and aluminum from Canada and Mexico in exchange for quotas after reaching a deal on a renegotiated North American Free Trade Agreement (Nafta), a move that is expected to help "normalize" US steel prices.

"We are engaging in talks now [with Canada and Mexico on steel and aluminum tariffs] with an effort to try to preserve the effect of our program," US Trade Representative Robert Lighthizer said today at a press conference at the White House.

US President Donald Trump said the tariffs will remain in place "until such time as we can do something that would be different, like quotas, perhaps, so that our industry is protected."

Canada's leaders said the conclusion of Nafta re-negotiations created "new momentum" around tariff negotiations.

"We are definitely looking to take advantage of that momentum to intensify conversations about steel and aluminum," Canada's foreign minister Chrystia Freeland said in a separate press conference.

US steel market participants were largely still assessing the impact of the announcement, but the removal of tariffs on two of the country's largest suppliers of foreign steel is expected to weigh on US steel prices that have surged in the wake of the 25pc tariff.

Trade agreements with Canada, Mexico and others "hold the keys to eventual US pricing normalization, particularly for hot-rolled coil," should the deals lead to quotas and/or freer trade, Cleveland-based investment bank KeyBanc said in a research note.

Canada and Mexico combined to account for 52pc of hot-rolled sheet imports of 2mn t and 26pc of total US steel imports of 34mn t in 2017.

Steel imports from the two countries fell by a combined 10pc through July from a year earlier, in line with a 10pc drop in overall US steel imports.

Trump and Lighthizer made their remarks while announcing a new trilateral trade deal that will replace Nafta.

The agreement, dubbed the US-Mexico-Canada Agreement (USMCA), modernizes the terms of a 25-year old Nafta pact that Trump has long-contended was the worst trade deal ever made.

The pact includes new provisions on digital trade, expands opportunities in Canada and Mexico for US farmers and alters the rules of origin for automobile production in an effort to boost North American manufacturers by limiting imports of parts made offshore.

The American Iron and Steel Institute (AISI) lauded the automobile provisions in the agreement, suggesting they will "ensure north American steel continues to be used in automobile production."

US steelmaker Nucor, the country's largest producer, called the USMCA "good for US steelmakers and US manufacturing as a whole" in a statement, noting the changes to the rules of origin for automobiles will benefit north American steelmakers.

The agreement must be approved by the US Congress before taking effect.

Still, the USMCA and negotiations over the tariffs will remain on two separate tracks, the US and Canada said.

The US negotiated similar tariff exemptions with Australia, Argentina, Brazil and South Korea earlier this year in return for quotas in most cases.

But sources in Canada suggested the country may be resistant to quotas, potentially setting the stage for a fight with Trump on a key piece of his domestic policy agenda ahead of the US mid-term elections.

"[US steel producers] are hiring thousands of workers all over the country," Trump said. "I am not giving that up."