Another hurdle has been cleared on the path to a North American trade deal.
On the afternoon of Friday, May 17, the Office of the U.S. Trade Representative (USTR) announced that the tariffs on steel and aluminum imports into the U.S. would be dropped for Canada and Mexico. This move is considered a necessary and encouraging one along the path to making the U.S.-Mexico-Canada Agreement (USMCA) a reality.
“This agreement is great news for American farmers that have been subject to retaliatory tariffs from Canada and Mexico,” noted the USTR announcement.
The joint U.S.-Canada and U.S.-Mexico statements outline that imports of steel and aluminum into the U.S. will be monitored. If imports “surge meaningfully beyond historic volumes of trade over a period of time” the U.S. metal tariffs may be reinstated. No definition of this was included in the agreements. The agreements also state that, should the metal tariffs be reinstated by the U.S., “the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).”
“Today’s announcement is a big win for American agriculture and the economy as a whole,” commented Agriculture Secretary Sonny Perdue in an official statement on Friday.
“Canada and Mexico are two of our top three trading partners, and it is my expectation that they will immediately pull back their retaliatory tariffs against our agricultural products. Congress should move swiftly to ratify the USMCA so American farmers can begin to benefit from the agreement.”
A brief tariff history
President Donald Trump began talking about applying 25 percent tariffs on steel and 10 percent tariffs on aluminum early in March 2018. Even before the tariffs were in place, he tweeted that the metal tariffs would “come off” Canada and Mexico only if a replacement to the North American Free Trade Agreement was signed.
Our neighbors were exempted from the initial application of the metal tariffs which applied to most of the world. On May 31, 2018, however, that exemption ended, and Canada and Mexico were hit with tariffs. Mexico was quick with retaliatory tariffs on U.S. agricultural products, especially a 20 percent tariff on U.S. pork.
Canada also responded with retaliatory tariffs in June and July of 2018, with some targeting U.S. ag products, including a 10 percent tariff on cooked and processed beef products.
“Canada’s actually our largest market for those items,” Joe Schuele, vice president of communications for the U.S. Meat Export Federation (USMEF), told WLJ at the time. He quantified it as $164-170 million out of a total $800 million worth of beef trade to Canada affected by the tariff.
“It wasn’t something that completely rocked the beef industry, but it is certainly good to have the 10 percent tariff removed,” he said last week.
In the days following the recent announcement about the metal tariffs, Canada and Mexico announced they dropped their retaliatory tariffs against the U.S.
The path to USMCA
“Restoring duty-free access to the Mexican and Canadian markets is a tremendous breakthrough for the U.S. red meat industry,” said U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom in a statement.
During a conference call with ag media held Tuesday, May 21, Halstom and others at USMEF discussed the impact of the tariff removals to getting USMCA ratified. There, Halstrom said:
“We are also hopeful that this could lead to a swift passing of the new USMCA, or NAFTA 2.0. The value of this relationship, the North American relationship with Canada and Mexico, in terms of potential export value for the beef, pork, and lamb industries cannot be understated.”
The USMCA was agreed to by the three countries on Nov. 30, 2018. However, it must be passed through Congress as well as the executive bodies in Canada and Mexico. The U.S. metal tariffs were one of the biggest hurdles for acceptance of USMCA in Canada and Mexico.
“Now that those are gone, from the Mexican government’s point of view, it’s going to be a quick resolution,” said Oscar Ferrara, USMEF regional director of Mexico, who spoke at the USMEF media call.
“Once the U.S. Congress passes the agreement—hopefully before the fall of this year—I think for the Mexican government it will be a very, let’s say, simple procedure in the Senate where the president of Mexico and the Party Morena have absolute control,” Ferrara said.
He characterized the USMCA situation as the ball being in the U.S. court, with Mexico and Canada effectively waiting for U.S. action.
Other challenges that remain to the ratification of USMCA is the Canadian Parliament, which adjourns for the summer on June 15. It will not be back until October following elections. The U.S. Congress similarly has a summer recess beginning in August. Given the time it can take for bills to move through the U.S. Congress, these are both very tight timelines. — Kerry Halladay, WLJ editor
