National Post (National Edition)
Existing tariffs prove USMCA solved zilch
It isn’t the first time the fighting with the Americans has continued after the peace was signed.
Two weeks after the Treaty of Ghent ended the War of 1812, the Americans were victorious in the Battle of New Orleans. In less dramatic fashion, the U.S. is continuing hostilities on the trade front with Canada nearly two weeks after the striking of the new USMCA — an agreement the Trump administration and the Trudeau government hailed as a deal that will result in “freer markets, fairer trade and robust economic growth in our region”.
Yet as Ken Neumann, the Canadian national director for the United Steelworkers, pointed out in the Globe and Mail this week, the Americans have maintained their tariffs on steel and aluminum exports to the U.S. using Section 232 of American trade law.
The 25-per-cent tariff on steel and 10-per-cent tariff on aluminum were imposed on the dubious basis that imports of those products from Canada pose a threat to U.S. national security.
That Canada signed a trade deal that leaves the tariffs in place is concerning. That the agreement leaves the door open to future use of Section 232 is more worrying still.
Global affairs minister Chrystia Freeland maintained that the modernization of NAFTA and the steel and aluminum dispute were separate issues. Yet the side letters that form part of the deal show that is not the case — Section 232 is now integral to the wider agreement.
One side letter states explicitly that if the U.S. takes action under Section 232, Canada is allowed equivalent commercial retaliation.
The prospect of more national security tariffs is very real — the U.S. is currently investigating uranium imports, for example.
Trump’s preferred method of dispute resolution is clear. The threat of tariffs on auto exports was forestalled by Canada’s acquiescence to a tariff-free vehicle quota of 2.6 million units, well above the 1.8 million currently being produced.
But on steel and aluminum, the Americans were looking to impose binding quotas far below normal export levels, similar to the 30-per-cent cut of the past three years’ average that South Korea was bullied into signing. To its credit, the Canadian government insisted any cap would have to be higher than current export levels.
But the existence of quotas and caps is evidence that this is not about “freer markets” or “fairer trade” — it is about the U.S. managing the relationship to its exclusive advantage.
Canada has retained the right to challenge Section 232 actions at the World Trade Organization but that is unlikely to deter a president who seems to enjoy kicking sand in the faces of weaker nations. What’s more, his strategy of repatriating production to the U.S. seems to be working.
After the new trade agreement was announced, the American Primary Aluminum Association said tariffs have been instrumental in the “recovery and restart of substantial primary aluminum capacity,” with production forecast to be up 60 per cent by the end of the year. “Continued tariffs or binding quotas for Canada and Mexico are critical for continuing and maintaining the restarts to rebuild this vital industry that was on the verge of extinction,” said Mark Duffy, executive director of the APAA.
Neumann said in his op-ed the United Steelworkers representing steel and aluminum workers on both sides of the border had condemned the tariffs.
Yet Leo Gerard, the USW’S president, was in the Oval Office when Trump signed the tariffs into law. While Gerard called for a Canadian exemption — he was born in Sudbury — that is not the message coming from the APAA, which lists the USW as one of its program partners. The Steelworkers appear to be sucking and blowing at the same time.
It is starting to sink in that the USMCA is not the victory for Canada that Justin Trudeau proclaimed when it was announced. As a U.S. State Department official quoted by Politico this week put it: the Trump administration has “deputized” Canada and Mexico in its war on globalism.
As if on cue, Canada announced Thursday that it will impose 25-per-cent tariffs on foreign steel where the level of imports “exceeds historical norms” — an attempt to protect domestic producers from cheap steel diverted from the now closed U.S. market.
The Americans have written into the agreement the ability to influence, inhibit and punish this country’s trade policy, including the prospect of signing future agreements with “non-market” countries like China.
In private, the Canadian negotiating side admit they are not thrilled, even as they express relief that things are not worse.
But there is little expectation that Washington will soon lift the existing tariffs and it is clearly anticipated that even more will follow.
We may have a piece of paper with the names of the three leaders written on it. But that does not constitute trade peace for our time.