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U.S., Mexico and Canada Near Deal on Metal Tariffs, Mnuchin Says White House Reassesses Tariffs as It Focuses on China Fight
(about 4 hours later)
WASHINGTON — The United States is nearing an agreement with Mexico and Canada to roll back its tariffs on steel and aluminum imports, Treasury Secretary Steven Mnuchin said Wednesday, potentially ending a standoff that has heightened tension among the three countries since President Trump imposed the duties last year. WASHINGTON — The Trump administration is in the midst of reassessing pieces of its tariffs strategy with allies around the world as it focuses on an all-encompassing trade war with China.
Mr. Mnuchin said at a Senate hearing that Mr. Trump had instructed his trade advisers to find a solution to the matter. The persistence of the tariffs has angered Canada and Mexico, which hoped they would be lifted after the countries agreed to a revised version of the North American Free Trade Agreement last year. The possibility that a resolution to the matter is at hand suggests that Mr. Trump is seeking to smooth relations with America’s neighbors to the north and south as his trade dispute with China escalates. The White House appeared poised to delay a decision due Friday to impose levies on foreign cars and car parts, people familiar with the situation said. Such a move would have taken aim at Japan and Europe, big auto manufacturers.
“I think we’re close to an understanding with Mexico and Canada,” Mr. Mnuchin said. “I can assure you it is a priority of ours.” On Wednesday, Treasury Secretary Steven Mnuchin also said that the United States was closing in on an agreement with Mexico and Canada to roll back tariffs on steel and aluminum, which were imposed last year. If the administration does, it would end a standoff that has heightened tensions among the three countries and complicated efforts to pass the new North American Free Trade Agreement into law.
He added that resolving the tariff issue was an important part of approving the new Nafta deal, known as the United States Mexico Canada Agreement. “I think we’re close to an understanding with Mexico and Canada,” Mr. Mnuchin said, at a Senate hearing Wednesday, noting that the president had urged his advisers to find a solution. “I can assure you it is a priority of ours.”
After the hearing, Mr. Mnuchin said he was not ready to say that the United States would be lifting tariffs.
The Trump administration imposed tariffs of 25 percent on steel and 10 percent on aluminum imports from around the world last year, saying that the pressure they had put on the country’s domestic metal industries posed a national security threat. Mexico and Canada, both of which retaliated with tariffs of their own, have appeared near an agreement on the duties before, but Mr. Trump has been hesitant to relent because of his belief that the health of America’s steel and aluminum sectors was too important to give in.
Republicans and Democrats in Congress have been sharply critical of the tariffs, warning that the new Nafta deal would not pass until they were removed.
Canada’s finance minister, Bill Morneau, told The New York Times last month that the levies could jeopardize his country’s ratification of the agreement.
In a possible sign of progress, Chrystia Freeland, Canada’s foreign minister, is expected on Wednesday to meet with Robert E. Lighthizer, Mr. Trump’s top trade negotiator, in Washington to discuss the issue.
Mexican officials have also expressed optimism on the topic. A senior Mexican official said this week that recent talks about removing the tariffs had been “fruitful.”
The United States has been trying to persuade Canada and Mexico to agree to a quota system for steel and aluminum in exchange for rolling back the tariffs. Canada and Mexico have argued that such quotas should not be necessary. It is unclear what terms the three countries are close to settling on.
Senator Chuck Grassley, Republican of Iowa and the chairman of the Senate Finance Committee, said he had been pressing Mr. Trump to eliminate the tariffs completely.
“It’s critical to the credibility of our global trade agenda,” Mr. Grassley told reporters on Tuesday. “I say the president needs to lift these tariffs.”
A potential breakthrough on the metal tariffs comes as Mr. Trump considers imposing tariffs on automobile imports. Analysts expect he will delay that decision, which has been scheduled for Friday, as markets have been on edge over the administration’s recent increase in tariffs on $200 billion of Chinese imports to 25 percent from 10 percent.
Mr. Mnuchin reiterated on Wednesday that China had recently retreated from commitments that it made in trade negotiations with the United States. He said he had no immediate plans to travel to Beijing, but that it was likely he and Mr. Lighthizer would do so before Mr. Trump’s scheduled meeting with President Xi Jinping of China at the G20 summit in Japan in June.
Asked after the hearing about the prospect of a deal with China, Mr. Mnuchin was cautious.Asked after the hearing about the prospect of a deal with China, Mr. Mnuchin was cautious.
“I’m hopeful,” he said. “I wouldn’t say I’m confident.”“I’m hopeful,” he said. “I wouldn’t say I’m confident.”
The potential rollback of certain tariffs reflects the challenge of fighting trade wars on multiple fronts. Lawmakers and businesses are putting more pressure on the White House to concentrate their efforts on combating China’s unfair trade practices, while reversing far more unpopular tariffs on allies like Europe, Canada and Mexico.
Yet the outcome for these tariffs is still uncertain. Mr. Trump has long been a devotee of tariffs, viewing them as an effective way to rebalance trading relationships.
Political advisers and auto industry executives have emphasized that the president will make the final decision on whether to impose tariffs of up to 25 percent on foreign cars. And the United States and Canada sent mixed signals Wednesday about the future of the steel and aluminum tariffs.
The Canadian foreign minister, Chrystia Freeland, declined to say whether the countries had struck a deal to lift steel and aluminum tariffs after meetings with lawmakers and Robert Lighthizer, the United States Trade Representative, in Washington on Wednesday.
Ms. Freeland said that her conversations had been “productive” and that the two sides have been in constant contact in recent weeks. But she suggested that it would be a mistake to predict how long negotiations would last.
“As has been the case from the outset, we believe that these tariffs need to be lifted,” Ms. Freeland said.
Even if the president rolls back metal levies on Canada and Mexico, the current level of tariffs in the United States would remain high. The levies that Mr. Trump has put in place have given the United States a tariff rate that is twice as high as the rates imposed by Canada, Britain, Italy, Germany and France.
And the overall tariff would increase greatly should Mr. Trump choose to impose measures on foreign cars. The specter of auto tariffs has hung over relations with the European Union and Japan, both major suppliers of automobiles to the United States. Canada and Mexico have negotiated a quota with the United States as part of their trade agreement that would exempt them from the measure.
While the president has frequently floated the idea of auto tariffs in the past, some advisers and auto company representatives have said they now see those levies as unlikely, given the fierce opposition among industry leaders and in Congress. The White House is now engaged in preliminary trade talks with the European Union and with Japan, and auto tariffs would throw a bomb into those negotiations.
The White House is expected to announce a six-month delay on an auto tariff decision later this week, a person familiar with the matter said. The decision was due by May 18.
“Pleased that @POTUS has delayed decision on auto tariffs,” Rob Portman, a senator from Ohio, tweeted Wednesday in response to media reports that the levies would not be imposed.
Auto tariffs would have opened another front to Mr. Trump’s trade war, but one with much smaller potential benefits and larger political liabilities. Auto industry executives on both sides of the Atlantic are opposed to tariffs, and the duties would have inflicted collateral damage on some of his most loyal voters in states like Alabama and South Carolina, which are home to big Mercedes-Benz and BMW factories.
“Our biggest market is Germany,” said Jeppe Kofod, a member of the European Parliament from Denmark. “The mere fact that Germany is hurt — we would be very much affected by that.”
The 25 percent tariff on steel and the 10 percent tariff on aluminum that the Trump administration imposed last year have had a more muted economic effect, but they have done much to rattle alliances.
Mexico and Canada, both of which retaliated with tariffs of their own, have previously appeared to be close to an agreement. But Mr. Trump has been hesitant to relent over his desire to protect America’s steel and aluminum sectors and his belief that the tariffs might be used as further leverage.
Republicans and Democrats in Congress have been sharply critical of the tariffs, warning that the new Nafta deal would not pass until they were removed.
Ms. Freeland said Wednesday that a failure to remove the tariffs could doom the deal in Canada.
“As long as the tariffs are in place, ratification will be very, very problematic,” she said.
The United States has been trying to persuade Canada and Mexico to agree to a quota system for steel and aluminum in exchange for rolling back the tariffs. Canada and Mexico have pushed back.
It is unclear what terms the three countries are close to settling on. But Mexican officials have expressed optimism on the topic. A senior Mexican official said this week that recent talks about removing the tariffs had been “fruitful.”
Senator Chuck Grassley, Republican of Iowa and the chairman of the Senate Finance Committee, said he had been pressing Mr. Trump to eliminate the metal tariffs completely.
“It’s critical to the credibility of our global trade agenda,” Mr. Grassley told reporters on Tuesday. “I say the president needs to lift these tariffs.”