The Trump administration has reached a deal with Canada and Mexico to lift steel and aluminum tariffs immediately, marking a significant step forward on the path to approval of the new North American trade pact.
The deal clears a major hurdle to ratification of the U.S.-Mexico-Canada Agreement in all three countries and moves President Donald Trump closer to realization of a signature trade achievement that he could tout during his 2020 reelection campaign. It also carries broader significance as it helps to repair frayed ties with two top U.S. allies at the same time that the Trump administration is ramping up trade tensions with China.
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“I’m pleased to announce that we’ve just reached an agreement with Canada and Mexico, and we’ll be selling our product into those countries without the imposition of tariffs or major tariffs. Big difference,” Trump announced in a speech in Washington on Friday.
Under the tariff agreement, the U.S. will remove metals duties against Canada and Mexico and will not impose quotas in their place. Trump had imposed the duties last year, relying on a little-used law that allowed him to apply tariffs on goods deemed essential to national security.
The tariffs of 25 percent on steel and 10 percent on aluminum, which Trump imposed to defend U.S. national security, will be gone within 48 hours, the three countries announced. In exchange, Canada and Mexico will lift the retaliatory tariffs they had imposed on scores of U.S. products, the bulk of which were American farm goods. Canada had imposed retaliatory tariffs against more than $12 billion in U.S. goods, while Mexico had established similar penalties against more than $3 billion in American exports.
The deal came together quickly in recent days but followed months of deadlock between the U.S. and its two North American trading partners. In a phone call on Sunday, Canadian Foreign Affairs Minister Chrystia Freeland got an invite to Washington.
When she arrived for a meeting with U.S. Trade Representative Robert Lighthizer on Wednesday, she was presented with the kind of deal Canada had been craving: no tariffs, no quotas and a promise to create a mechanism to limit Chinese steel imports.
The Canadians were thrilled — and also terrified by the possibility of word leaking out.
That’s because Lighthizer had berated his Canadian counterparts more than once over leaks during the negotiations to update NAFTA. This time, the Canadians were petrified that loose lips might set off the publicity-averse U.S. trade representative and torpedo the talks.
So Freeland spoke in generalities in a subsequent press conference. Staff wouldn’t speculate on the likelihood of a deal. Even Senate Finance Chairman Chuck Grassley, who officials said was integral to helping pull together the deal, professed to be in the dark after meeting Freeland that day.
The Iowa Republican became a key ally of the Canadian minister ever since a February meeting where he expressed to Freeland his annoyance over the tariffs. In the weeks that followed, he and like-minded officials in Canada and Mexico kept repeating a single mantra: If Trump wanted his cherished trade deal to be ratified, he would need to drop the tariffs.
In recent weeks, other Republican members of Congress from rural states had also been pushing the White House to act, especially as the China trade talks appeared to be falling apart. Trump and his aides felt he needed a win following a slew of bad headlines regarding the China trade war.
So Freeland left Washington on Wednesday for a previously planned trip to Cuba. Between meetings in Havana, she called officials back home to work out details of the steel component. She cut that trip short, and, finally, it was during her layover in Panama City that she and Lighthizer sorted out the final sticking points.
The deal serves as a relief for pro-traders on Capitol Hill and could alleviate some of the pain and uncertainty in American farm country, which is bearing the brunt of myriad retaliatory trade actions from around the globe. U.S. farmers have been increasingly concerned about long-term economic damage from Trump’s trade agenda, particularly after the escalation of the tariff battle with China earlier this month.
The Office of the U.S. Trade Representative, in its official announcement laying out details of the deal, called the arrangement “great news” for American farmers while emphasizing that it will “continue to protect America’s steel and aluminum industries.”
Canada and Mexico were similarly upbeat about the agreement. Canadian Prime Minister Justin Trudeau called the announcement “good news for North America,” while Mexican President Andrés Manuel López Obrador’s office welcomed the deal as “beneficial for both sides.”
Trudeau and López Obrador both acknowledged that removing the metals tariffs will help propel each of their countries toward approval of the new North American trade deal, which the three sides signed in late November. In the United States, Friday’s announcement was welcomed by lawmakers who had long warned the administration that trying to push the USMCA through Congress while the steel and aluminum duties remained in place would prove to be a painful and potentially fruitless effort.
Grassley, who will play a pivotal role in congressional consideration of the NAFTA replacement, expressed optimism on Friday that the tariff fix creates a “renewed sense of momentum” that will help get the new trade pact passed this year.
“The Trump administration has done its part,” the Iowa Republican said. “Now it’s Congress’s turn.”
While the tariff-relief deal helps to improve prospects for ratification of the USMCA, it does not guarantee its passage. Many lawmakers — particularly House Democrats, who will be crucial to the deal’s approval — have repeatedly laid out concerns with the trade pact’s labor standards and enforcement provisions, among other issues, that they insist must be addressed before they will consider it.
The tariffs have “needlessly complicated the NAFTA renegotiation dynamics over the past year,” House Ways and Means Chairman Richard Neal (D-Mass.) said Friday afternoon, but he added that Democrats’ concerns with USMCA remain unresolved.
“Those issues still need to be remedied,” he said.
Immediate implications for the new NAFTA aside, however, the steel deal helps highlight a new front in trade policy for Trump — a self-proclaimed “Tariff Man” who until now had focused far more often on imposing tariffs rather than removing them. The metals agreement was announced on the same day the White House unveiled a decision to delay potential automotive tariffs against two other top trading partners, the European Union and Japan.
U.S. agriculture groups were quick to welcome the deal as a move that will help ease financial strain on American farmers, with Grassley, for one, saying farmers from his state could now “breathe a sigh of relief.”
But more broadly, the tariff decisions in tandem also highlight a shift in the administration’s focus — drawing down trade tensions with allies as it confronts China.
And repairing the relationship within North America could be the first step toward pulling allies onto the U.S.’s side in its escalating fight with China. The Trump administration more than doubled tariffs on $200 billion in Chinese imports a week ago, and it is considering adding penalties on another $300 billion.
Grassley regarded the positive step toward USMCA passage as a move that will help boost the administration’s credibility in trade talks with Beijing.
“Ratification of USMCA will show that the United States can be trusted to follow through on its commitments,” Grassley said. “It’s up to China to show that it can do the same.”
Doug Palmer and Anita Kumar contributed to this report.