Ag Policy Blog

Border Dispute and Tariffs Risk Potential Trade Gains

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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NAFTA bonds the U.S. with Canada and Mexico, but tariffs and border disputes are complicating the USMCA.

President Donald Trump said Tuesday he hasn't fully made up his mind whether to close the southern border with Mexico, but if Mexico doesn't step up enforcement at the border, and congressional Democrats don't deal with Republicans, then the president said he would move forward on closing the border.

Regarding trade, the president said it would have a negative impact on the economy, but Trump said "We're going to have security in this country. That's more important than trade."

U.S. agricultural exports to Mexico add up to about $19 billion and forecast to rise slightly for 2019. The U.S. also imports $25.6 billion from Mexico as well. Other industries would see significant impacts as well, especially in areas such as auto manufacturing.

As President Trump and his team talk about shutting down the border, Sen. Charles Grassley, R-Iowa, went to the Senate floor on Monday asking the president to quickly remove the Section 232 tariffs on steel and aluminum imports from Mexico and Canada. Grassley said dropping the tariffs would open the door to getting the U.S.-Mexico-Canada Agreement passed.

"He answered no to a direct question when I asked him," Grassley said, adding the tariffs were put on because Trump didn't think in 2017 that Mexico and Canada would renegotiate NAFTA. Still, Grassley said Trump doesn't want to discuss removing the tariffs. "One word answer 'no'."

Grassley criticized White House trade advisor Peter Navarro, who insists the 232 tariffs and the USMCA are separate issues. "Well just think how stupid of a statement that is when they were conflated when you got the negotiations going," Grassley said.

Canada's Parliament adjourns in June until elections are held in October. If USMCA isn't ratified by Canada before the parliament adjourns, the USMCA ratification could easily carry into 2020.

Grassley said he doesn't understand why the president doesn’t capitulate on the tariffs because renegotiating NAFTA into USMCA "is a real victory for him. It's a real campaign promise kept. So why the real slow movement on getting rid of them, particularly to help Canada get this thing done by June ... I don't know why it is taking him so long to realize he's got a victory at hand. Just take these tariffs off. They have got to come off."

Canadian Finance Minister Bill Morneau told Bloomberg on Monday that the metal tariffs should be lifted before the USMCA is approved.…

Added to this complicated trade-and-border mix, Politico also reported Tuesday that House Speaker Nancy Pelosi said the House won't take up the USMCA "until after Mexico has passed and implemented its major labor law reforms." Mexico, according to the article, plans to pass such legislation "before its Congress goes on recess at the end of April."…

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