President Donald Trump's proposal to impose tariffs on steel and aluminum imports hung over the latest round of North American Free Trade Agreement talks, potentially dampening progress that was made and intensifying friction with Canada, which threatened to retaliate against U.S. exports.
The conclusion of the seventh round of NAFTA talks on March 5 in Mexico City comes at a turbulent time for U.S.-Canada-Mexico trade relations. Trump on March 5 doubled down on his plans to impose tariffs of 25% on global steel imports and 10% on aluminum imports, tweeting earlier in the day that he would not consider taking the tariffs off Canada and Mexico unless NAFTA was reworked to his administration's liking. Trump has repeatedly threatened to withdraw from the free trade deal, which now appears to be more imperiled than ever in the wake of talk of U.S. steel and aluminum tariffs, which injected another shot of tension into the already contentious NAFTA discussions.
Canadian Minister of Affairs Chrystia Freeland said Canada will take "appropriate" responsive measures should the U.S. place tariffs on Canadian steel and aluminum, during a trilateral press conference March 5.
"As the number one customer of American steel, Canada would view any restrictions on Canadian steel and aluminum as absolutely unacceptable," she said. "Should restrictions be imposed on Canadian steel and aluminum products, Canada will take appropriate, responsive measures to defend our trade interests and our workers. And we will continue to stand up for steel and aluminum workers and industry."
The U.S. accounts for 87% of Canadian steel exports, according to a February 2017 U.S. Department of Commerce report.
"We have large trade deficits with Mexico and Canada," Trump tweeted March 5. "NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on steel and aluminum will only come off if new & fair NAFTA agreement is signed."
According to the Office of the U.S. Trade Representative, the U.S. runs a $63.2 billion trade deficit with Mexico and a $12.1 billion deficit with Canada.
The NAFTA talks were already moving slowly even before the tariff announcement created more potential divisions among the parties, but officials from the three countries said some progress was made in the latest round.
U.S. Trade Representative Robert Lighthizer said three chapters were completed and closed during the latest round of NAFTA talks, including those on good regulatory practices, administration and publication, and sanitary and phytosanitary measures. Despite that progress, which brought to six the total number of closed chapters, he warned that it was not enough. In order to get to an updated trade agreement, the three countries need to close roughly 30 chapters, he said.
"We are dealing with a large number of difficult issues, very technical issues," Lighthizer said. "In spite of this hard work, we have not made the progress that many had hoped in this round. I feel the longer we proceed, the more political headwinds we will feel."
He cautioned that the 2018 U.S. midterm elections, the Mexican presidential election later this year and numerous Canadian provincial general elections in the coming months could all hinder the possibility of reaching a trilateral agreement to improve upon the 24-year-old NAFTA deal.
"If that proves impossible, we are willing to move on a bipartisan basis," he added. "We are at the point where very important decisions need to be made."
However, both Freeland and Mexican Secretary of Economy Ildefonso Guajardo Villarreal took more optimistic tones pointing to the three chapters that were closed in the last round, which ran Feb. 26-March 5. Guajardo said the three countries are also close to finishing additional chapters and took the view that chapters could be closed more easily with each passing round.
"In this round, we are increasing 100% the efficiency," Guajardo said. "I think the three closed chapters ... are very closed chapters."
Freeland said Canada is "committed to the success of the negotiations" ahead of the eighth round of talks, which are scheduled to be held in Washington at a date not yet announced.
The close of the seventh round of talks followed a sixth round that was marked by progress and cooperation after several tense rounds that saw Canada and Mexico voice opposition to many U.S. proposals, including those involving rules of origin and a sunset clause of the deal.
