WASHINGTON — The governments of the United States, Mexico and Canada have reached an agreement to roll back metal tariffs, known as Section 232 tariffs, a move that could hasten passage of the U.S.-Mexico-Canada Agreement (USMCA).
The deal, which includes the U.S. lifting import taxes on Canadian and Mexican steel and aluminum, was announced Friday, May 17.
As part of Friday’s arrangement, the Canadians and Mexicans agreed to scrap retaliatory tariffs they had imposed on U.S. goods.
Those retaliatory tariffs included some against U.S. dairy products — duties as high as 25 percent on U.S. cheese exports to Mexico.
“America’s struggling dairy farmers are in need of some good news, and today’s announcement certainly helps,” said Jim Mulhern, president and CEO of the National Milk Producers Federation. “This paves the way for Mexico to drop retaliatory tariffs that have harmed dairy, and for Congress to take its next step to help our producers – to vote on USMCA and quickly ratify it.”
Mexico is, by far, America’s biggest dairy customer, with $1.4 billion in sales last year. U.S. products accounted for 80 percent of Mexican dairy imports by value in 2018, but that dominant market share was jeopardized by the retaliatory tariffs.
Pork producers happy
David Herring, a pork producer from Lillington, N.C., and president of the National Pork Producers Council, said the trade dispute has placed “enormous financial strain on American pork producers.”
The council estimates Mexico’s 20% retaliatory tariff on U.S. pork has cost U.S. producers $12 per animal, or $1.5 billion on an annualized, industry-wide basis.
Removing the metal tariffs restores zero-tariff trade to U.S. pork’s largest export market, he added. Last year, Canada and Mexico took over 40% of the pork that was exported from the United States.
The announcement was also good news to U.S. wheat growers, as the USMCA agreement retains tariff-free access to imported U.S. wheat for flour milling customers in Mexico, and the updated USMCA agreement would enable U.S. varieties registered in Canada to be afforded reciprocal treatment.
Focused on China
In a joint statement, the U.S. and Canada said they would work to prevent cheap imports of steel and aluminum from entering North America. The provision appeared to target China, which has long been accused of flooding world markets with subsidized metal, driving down world prices and hurting U.S. producers.
The countries could also reimpose the tariffs if they faced a “surge” in steel or aluminum imports.
Section 232
Although imposed under Section 232 of the Trade Expansion Act of 1962 — which lets the president impose tariffs on imports if the Commerce Department deems them a threat to national security — the steel and aluminum tariffs were also designed to coerce Canada and Mexico into agreeing to a rewrite of North American free trade pact.
The new USMCA trade deal needs approval from legislatures in the U.S., Canada and Mexico. Several key U.S. lawmakers were threatening to reject the pact unless the tariffs were removed. And Canada had suggested it wouldn’t ratify any deal with tariffs still in place.
Auto tariffs
Earlier Friday, the White House said President Donald Trump is delaying for six months any decision to slap tariffs on foreign cars, a move that would have hit Japan and the Europe especially hard.
Trump had faced a Saturday deadline to decide what to do about the auto tariffs.
He is still hoping to use the threat of auto tariffs to pressure Japan and the European Union into making concessions in ongoing trade talks.
“If agreements are not reached within 180 days, the president will determine whether and what further action needs to be taken,” White House press secretary Sarah Sanders said in a statement.
Taxing auto tariffs would mark a major escalation in Trump’s aggressive trade policies and likely would meet resistance in Congress. The United States last year imported $192 billion worth of passenger vehicles and $159 billion in auto parts.
“I have serious questions about the legitimacy of using national security as a basis to impose tariffs on cars and car parts,” said Iowa Republican Sen. Chuck Grassley, chair of the Senate Finance Committee who is working on legislation to scale back the president’s authority to impose national security tariffs under Section 232.
Trump deferred action on tariffs for 180 days to give negotiators time to work out deals but threatened them if talks break down. In justifying tariffs for national security reasons,
The Commerce Department said the U.S. industrial base depends on technology developed by American-owned auto companies to maintain U.S. military superiority.
Because of rising imports of autos and parts over the past 30 years, the market share of U.S.-owned automakers has fallen. That has caused a lag in research and development spending which is “weakening innovation and, accordingly, threatening to impair our national security,” a statement said.
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