NAFTA and Trump Tariffs

KANSAS CITY, Mo. (DTN) -- Concern about President Donald Trump's planned worldwide tariffs on steel and aluminum imports has shifted from the impact on agriculture exports to China to disruptions of the trade relationships with Mexico and Canada.

The United States imports more steel and aluminum from Mexico and Canada than from China. President Donald Trump tweeted Monday that new steel and aluminum tariffs on Mexico and Canada would "come off" only if a new North American Free Trade Agreement is signed.

The new aspect of metal tariffs doesn't bode well for U.S. agriculture, which wants NAFTA talks to end without changes to the zero-tariff exports for nearly all U.S. commodities.

The U.S. has not officially set tariffs, but last week the president declared that he would be signing an order to issue 25% tariffs on steel and 10% tariffs on aluminum sometime this week.

But Mexican Economy Secretary Ildefonso Guajardo said on Twitter that including Mexico in any steel and aluminum tariffs is no way to strike a revised NAFTA deal.

A spokeswoman for House Speaker Paul Ryan, R-Wis., said, "We are extremely worried about the consequences of a trade war, and are urging the White House to not advance with this plan. The new tax reform law has boosted the economy and we certainly don't want to jeopardize those gains."

Other Republicans urged Trump not to move forward with the tariffs but at a White House news conference the president made a long statement to reporters, "No, we're not backing down. Mexico is -- we've had a very bad deal with Mexico, a very bad deal with Canada. It's called NAFTA."

The president added, "Our factories have left our country. Our jobs have left our country. For many years NAFTA has been a disaster. We are renegotiating NAFTA, as I said I would. And if we don't make a deal, I'll terminate NAFTA.

"But if I do make a deal which is fair to the workers and to the American people, that would be, I would imagine, one of the points that we'll negotiate. It will be tariffs on steel for Canada and for Mexico.

"So we'll see what happens. But right now, 100%. But it could be a part of NAFTA. And I understand -- I just got a call from the people who are right now in Mexico City negotiating NAFTA. Mexico and, really, Canada want to talk about it. But if they aren't going to make a fair NAFTA deal, we're just going to leave it this way.

"People have to understand, our country, on trade, has been ripped off by virtually every country in the world, whether it's friend or enemy -- everybody. China, Russia," Trump said. "And take people that we think are wonderful -- the European Union -- we can't do business in there. They don't allow it. They have trade barriers that are worse than tariffs. They also have tariffs, by the way, but they have trade barriers far worse than tariffs. And if they want to do something, we'll just tax their cars that they send in here like water.

"So we may have friends, but remember this: We lost, over the last number of years, $800 billion a year. Not a half a million dollars, not 12 cents. We lost $800 billion a year on trade. Not going to happen. We got to get it back.

"And, of course, the biggest problem -- the biggest problem is China. We lost $500 billion. How previous presidents allowed that to happen is disgraceful. But we're going to take care of it."

At the closing of the NAFTA negotiating session in Mexico City, Trade Representative Robert Lighthizer did not mention the steel and aluminum tariffs but said "we have not made the progress that many had hoped in this round. We have closed out only three additional chapters: Good Regulatory Practices, Administration and Publication, and Sanitary and Phytosanitary Measures," Lighthizer said.

"We have also completed work on sectoral annexes related to chemicals and proprietary food formulas," he said. "And we are making substantial progress on Telecommunications and Technical Barriers to Trade. We have also agreed to include a chapter on energy. These chapters are important and provide further evidence that all three countries want to upgrade and modernize NAFTA.

"But to complete NAFTA 2.0, we will need agreement on roughly 30 chapters. So far, after seven months we have completed just six."

NAFTA, he said, should address modern trade issues and be "rebalanced."

He concluded, "Now our time is running very short. On July 1, as everyone here knows, Mexico will choose a new president. That campaign as I understand it begins in earnest just next month.

"But Mexico is not the only NAFTA country in the midst of elections. Both Ontario and Quebec have elections scheduled later this year. Finally, the United States has mid-term elections coming up in November. All of this complicates our work. I fear that the longer we proceed, the more political headwinds we will feel."

Jerry Hagstrom can be reached at jhagstrom@njdc.com

Follow Jerry Hagstrom on Twitter @hagstromreport

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