Steel, aluminum tariffs threat looms over NAFTA talks

WASHINGTON — To hear Chrystia Freeland tell it, NAFTA and steel are like apples and oranges.

Canada’s foreign minister is in Washington this week to avert an economic storm that could see Canada sideswiped by crippling U.S. tariffs on imports of steel and aluminum if U.S. President Donald Trump follows through on his latest threat not to extend an exemption for Canada and Mexico that is due to expire Friday.

That is on top of the around-the-clock effort by Canada, the United States and Mexico to get a deal on a renegotiated North American Free Trade Agreement — in time for the current iteration of the U.S. Congress, and ahead of what’s expected to be a turning-point election in Mexico on July 1.

Freeland emerged Tuesday from a meeting with U.S. trade czar Robert Lighthizer with the threat of both problems still hovering in the oppressive Washington humidity.

She insisted the steel issue remains separate from the renegotiation of NAFTA, a deal that Trump has repeatedly blasted and threatened to rip up.

“Canada has said from the outset this is, in our view, entirely separate from the NAFTA negotiation,” she said after her two-hour, face-to-face meeting inside the office of the U.S. Trade Representative, the site of intensive NAFTA talks over the last several weeks.

U.S. trade analysts said there’s an obvious connection, but Freeland might be downplaying it in an attempt to bargain effectively.

“Everything in Trump world is linked, ultimately,” Eric Miller of the Rideau Potomac Strategy Group, said in an interview. “In that context, Minister Freeland is making a big push for aluminum and steel exemptions.

“The Trump administration could well say we feel we have made enough progress on NAFTA in order to give an exemption to Canada and Mexico.”

If Trump follows through with the tariff threat, it will have been in Freeland’s interest to separate steel from NAFTA to increase the ability to move forward with an agreement on the continental pact later, Miller said.

Freeland and Lighthizer continued their discussion later in the day by telephone, and she planned to return to Ottawa this morning.

Dan Ujczo, an American trade lawyer with Dickinson Wright PLLC, said the main focus on Freeland’s trip has to be securing the steel and aluminum exemption by Friday because NAFTA is not getting through the U.S. Congress this year anyway.

Many people inside the Washington beltway are betting on Trump offering up a 30-day extension to the exemption, following a past pattern of threats and then, extension. But Ujczo said betting on that this time would be folly.

He said Trump has to follow through. Otherwise, his broader trade agenda with China might suffer.

“That leverage from the tariffs only works if you actually demonstrate a willingness to pull the trigger,” he said Tuesday.

“The president is deploying that strategy with China. I believe that he may do the same with North America and Europe unless they come to the table with an offer.”

In the past, Freeland has said Canada wouldn’t take NAFTA’s demise lightly, and she warned Tuesday that there will be consequences as well if Canada loses its steel and aluminum exemption: “Our government always is very ready and very prepared to respond appropriately to every action.”