Canada, U.S. nearing agreement to lift steel and aluminum tariffs, cease trade war

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Canada is closing in on an agreement with the Trump administration to lift American steel and aluminum tariffs and end the countries’ nearly year-old trade war.

Mexico, for its part, has almost reached an accord with Washington to end the levies – but opted to pause so Ottawa could have a chance to work something out with the United States.

U.S. President Donald Trump’s Treasury Secretary, Steven Mnuchin, said the three countries are “close to an understanding” on the issue, in the most optimistic comment about the status of the continental trade confrontation in months.

Foreign Minister Chrystia Freeland met Wednesday in Washington with Robert Lighthizer, Mr. Trump’s trade chief, amid accelerating talks to end the tariffs.

“It was a good meeting,” Ms. Freeland told reporters after leaving Mr. Lighthizer’s office near the White House. “We made the case … that the best outcome for both Canadians and Americans would be to lift those tariffs.”

The Foreign Minister refused to divulge details of the talks, saying that “talking about negotiations in public was counterproductive” and that it would be “a mistake” to predict how long they would last.

One Canadian official with knowledge of the negotiations said talks had been productive and were moving in the right direction, but it was still uncertain whether there would be a deal. The source said the holdup is largely about specific details of the agreement that have to be further reviewed by Canada and run by industry.

Another source said the problem is that many of the mechanics of the deal are either vague or not written down, and Canadian negotiators were afraid of agreeing to something before they knew exactly how it would work.

The Globe and Mail granted the sources anonymity because they were not authorized to speak publicly on the issue.

Jesus Seade, Mexico’s chief negotiator on the file, told The Globe that he has all but agreed to a deal with the United States to lift the tariffs.

Mr. Seade said his pending agreement would see tariffs lifted without Mexico having to agree to export quotas, which had been the Trump administration’s chief demand. Instead, he said, Mexico would take tougher measures to stop Chinese steel from being routed through Mexico to the United States in order to evade American tariffs.

“I think we are very close to coming to an agreement, which we decided to freeze for a moment to see where Canada is,” Mr. Seade said in an interview in Ottawa.

He said he wanted to keep Canada in the fold because he “did not want to repeat the dynamic" of the late stages of NAFTA talks last year. During those renegotiations of the North American free-trade agreement, Mexico cut a deal with the United States first, forcing Canada to scramble to resolve its issues with the United States to avoid getting cut out of the continental trade pact.

A scenario in which the United States and Mexico ended their trade war while the fight continued between Canada and the United States could heighten the economic fallout in Canada.

Mr. Mnuchin told a congressional committee that Mr. Trump wants the issue settled – a sign that augers well for a resolution.

“We’re close to an understanding with Mexico and Canada,” he said. “I can assure you it is a priority of ours.”

Both Canada and Mexico have refused to ratify the renegotiated NAFTA, dubbed the United States-Mexico-Canada Agreement (USMCA) by Mr. Trump, until the tariffs are lifted.

Some powerful members of Congress including Chuck Grassley, the Republican chair of the Senate finance committee, have warned they will not consider approving the USMCA as long as tariffs are on. Ms. Freeland met Wednesday with Mr. Grassley and Earl Blumenauer, chair of the House subcommittee on trade.

Mr. Grassley said there was “nothing settled” between Canada and the United States and it wasn’t clear to him how far apart the two sides were. “I asked that question and I wasn’t able to get an answer,” he said.

Mr. Trump imposed the tariffs of 25 per cent on steel and 10 per cent on aluminum last spring. Canada and Mexico responded with retaliatory tariffs on a suite of American consumer goods, from ketchup to lawnmowers.

The United States demanded that Canada and Mexico agree to quotas that would cut the amount of steel and aluminum they export to the United States in exchange for the lifting of tariffs. Both Canada and Mexico refused, though one Canadian official said Ottawa could agree to a quota if it was set so high that Canada would not actually reach it any time soon.

Mr. Seade said it was Mexico that launched a new round of intense talks three weeks ago. He stated unequivocally that Mexico’s working agreement with the United States includes no quotas.

He described a deal aimed at easing U.S. concerns in another way, by creating tracking mechanisms for imports of steel for other countries, to determine if other countries – China is presumably the unnamed target – are trying to ship products to the United States via Canada and Mexico.

Mr. Seade said he discussed the parameters of Mexico’s potential agreement with the United States with Ms. Freeland on Tuesday, and he is optimistic Canada can work on a similar track.

“I’m delighted to say that everything that I said seemed to be fine for her, or good for her,” he said. “So I hope there will be a quick negotiation between Canada and the United States."