Canada and Mexico will be exempt from tariffs on steel and aluminum exported to the United States, but there is no guarantee that this will be the case forever.
US President Donald Trump promulgated the decree imposing these tariffs at an official signing ceremony at the White House on Thursday afternoon.
The United States will indeed impose a 25% duty on imported steel and a 10% tax on aluminum. These rates will come into effect in 15 days.
All countries in the world are covered, except Canada, which supplies more than one-sixth of all steel used by the United States and more than 40% of its aluminum, and Mexico.
The President invokes national security reasons under the Trade Expansion Act of 1962, a US law little used until then, to justify this exemption.
A “step forward” for Canada
For Canadian Foreign Minister Chrystia Freeland, Canada’s exemption from these tariffs is a “step forward”.
“Canada is America’s best friend and closest ally,” she says. That Canada is considered a threat to the security of the United States is inconceivable. ”
She submits that obtaining Canada’s exemption is the result of hard work.
The work continues and will only stop when the threat of these duties vanishes completely and permanently.
Chrystia Freeland, Minister of Foreign Affairs of Canada
“We will not stand idly by while the livelihoods of Canadians are at risk,” the minister said at a news conference in Toronto.
An exemption that depends on the success of NAFTA
“If we come to a new agreement with Canada and Mexico on NAFTA, these two countries will not be taxed on steel and aluminum,” said the president in his speech. Thursday afternoon.
This is a direct reference to the NAFTA negotiations, which are currently in their eighth round of talks and which should allow the three countries to update the agreement by more than 20 years.
The temporary exemption could therefore be lifted if the United States failed to obtain the required concessions at these talks.
Canadian metal producers could be subject to the same punitive tariff as the rest of the world, very soon.
Canada exported $15 billion worth of these two metals to the United States last year, so a tariff would likely result in retaliation of US goods imported into Canada.
Canada, for its part, maintains that the NAFTA negotiations and the reasons of national security invoked to impose tariffs are two completely different issues.
“Today’s announcement will not change our strategy,” said Minister Freeland, who points out that Canada has been following the same path since negotiations began last year to “modernize NAFTA”. in a way that will promote the interests of Canadians.”
Asia denounces tariffs
Reactions to the imposition of tariffs are strong in Asia, with Japan and China strongly opposing them.
The Chinese Ministry of Commerce denounced in a statement “the abuse of the national security clause by the United States,” calling it “deliberate attack on the multilateral trading system embodied by the World Trade Organization.”
China has also warned of a “serious impact on the world trade order”.
The Chinese Foreign Minister assured that Beijing will adopt a “proper and necessary response” in the event of a trade war with the United States.
China is the world’s largest producer of steel and aluminum. Its production, however, represents only 2.7% of US steel imports and 9.7% of aluminum imports.
“We will take appropriate action after careful consideration of the impact on the Japanese economy,” said Japan’s foreign minister, who described the taxes on US imports as “regrettable”.
He warned that the measure could have “a serious impact on the economic relations between Japan and the United States, which are allies, and also on the world economy”. Japan is the sixth largest supplier of steel in the United States.
A list of US products targeted by the EU
The European Union has promised to heavily tax dozens of US products if it was affected by customs duties. It is :
- Some rolled steels, stainless steel bars, seamless tubes, steel wires, doors, windows, tools and cutlery.
- Beans, corn and rice, cranberries, orange juice, peanut butter, bourbon, cigars, cigarettes, tobacco.
- T-shirts and undershirts, jeans, shorts, cotton bed linen and some leather shoes.
- Lipstick, eye makeup, nail polish and foundation.
- Motorcycles with a cylinder capacity greater than 500 cm3, sailing, pleasure or sport boats, with or without motor, rowing boats and canoes
Economic benefits are already being felt in the United States
“The US steel and aluminum industry has been devastated by aggressive foreign business practices,” said Trump. “It’s a real aggression against our country. ”
Donald Trump said that long-term “dumping” by foreign companies has led many factories to close down or eliminate many jobs. “We are going to reopen these factories, they will produce again and it will be very positive for our country,” he concluded.
In his speech after the signing of the decree, Donald Trump announced that the benefits to the US economy were already being felt. “US Steel has announced its reopening in Illinois and has recalled 500 technically unemployed workers on the spot. ”
“Century, an aluminum smelter in Kentucky, will invest more than $ 100 million to reopen its military-grade aluminum production plant … 150,000 tonnes more aluminum going into production and 300 more workers will be engaged, “he added.
Mr. Trump also invited metallurgical companies to come to the United States.
“We are not going to impose taxes on products made in the United States. You do not want to pay the tax? Move your factory here! Said the US president.
“We urge all companies to buy American,” he repeated.
Republican House Speaker Paul Ryan disagreed in a statement and “fears unintended consequences”. However, he welcomed the exemption granted to Canada and Mexico.
Hunter Texidor was born and raised in Toronto. He has written for Billboard, The Prague Post and Passport Magazine. In regards to academics, Sage earn his BBA from Mcmaster in Hamilton. Hunter covers business and economy stories here at Billionaire 365.