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Canada ‘encouraged’ in U.S. tariff war on metals but no solution in sight

Canada ‘encouraged’ in U.S. tariff war on metals but no solution in sight
Business
OTTAWA - Canada’s year-long standoff with the Trump administration over punitive U.S. steel and aluminum tariffs finally ended Friday, prompting a collective cheer from the industry and removing a critical obstacle to the effort to ratify the new North American trade pact.

Canada and the U.S. will now work together to get the U.S.-Mexico-Canada Agreement (USMCA), known colloquially in both countries as the “new NAFTA,” approved in the coming weeks, said Prime Minister Justin Trudeau.

“This is just pure good news for Canadians, for families, as they head into that long weekend” in several provinces, including Ontario, Trudeau said Friday during an unscheduled, last-minute visit to a Stelco plant in Hamilton, Canada’s steel-manufacturing capital.

“Families will know that their jobs are just a little more secure.”

Trudeau’s office hastily arranged the announcement while his Air Force jet was crossing the Atlantic Ocean from Paris, where he had ended an official visit.

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Trudeau framed his victory lap carefully so as not to offend the mercurial U.S. president, who called him weak and dishonest almost one year ago after leaving the G7 summit in Quebec. And he did not mention China by name — the country that the U.S. and Canada will now carefully monitor to prevent it from dumping cheap steel into their market.

Canada is embroiled in a political crisis with China and is trying to win the release of two Canadian men it says are “arbitrarily” imprisoned as national security threats, and is seeking clemency for a third facing an upgraded death sentence for drug smuggling.

“We stayed strong because that’s what workers were asking ... that’s what Canadians were saying,” Trudeau said. “These tariffs didn’t make sense around national security. They were hurting Canadian consumers, Canadian workers, and American workers and American consumers.

Global Affairs Canada says the tariffs will be removed within two days, while Canada has also agreed to drop all of its retaliatory measures and legal actions against the U.S. at the World Trade Organization.

Prior to speaking to journalists, Trudeau toured Stelco and met workers to break the news directly to them first. He was joined by several cabinet ministers, including Foreign Affairs Minister Chrystia Freeland and Finance Minister Bill Morneau.

Word of the agreement began to trickle out Friday amid reports that U.S. negotiators had backed off long-standing demands for a hard limit on imports of Canadian steel and aluminum, part of an effort to keep cheap Chinese product out of the country.

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Late Friday morning, President Donald Trump and Trudeau wrapped up their third phone call in less than a week on the tariff dispute, which includes Canada’s decision to retaliate with more than $16 billion of its own punitive levies on American products.

Trudeau offered a shout-out to Canadian unions for their support, and said it helped the government hold firm to U.S. demands that it submit to quotas before lifting the tariffs.

“Canadian workers and their families are breathing a big sigh of relief today and we hope that affected companies will be able to reverse any layoffs,” Hassan Yussuf, the president of the Canadian Labour Congress, said on Twitter.

“Ending tariffs means Canadians can get back to work.”

Toronto trade lawyer Lawrence Herman said it’s too soon to predict whether Democrats in the U.S. House of Representatives will ratify the new North American trade pact.

“But it looks like some sense of sanity has prevailed in the White House at long last, helped along the way by huge pressure from the U.S. private sector that found these surcharges to be very hurtful,” Herman said.

One year ago, Commerce Secretary Wilbur Ross said the tariffs on Canada, as well as Mexico, were necessary to prevent a flood of cheap Chinese steel into the U.S. through its NAFTA partner countries.

Ross also said the U.S. was imposing tariffs on Canada and Mexico because the trade talks were taking too long, even though they were ostensibly imposed under a section of American trade law that gives the president that authority to do that to protect national security.

The Trudeau government branded the tariffs as illegal, absurd and insulting, warning that Canada and Mexico would struggle to ratify the United States-Mexico-Canada Agreement, or USMCA, with the levies still in place.

The agreement says the U.S. and Canada will establish a process for monitoring steel and aluminum trade between them.

“In the event that imports of steel or aluminum products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 per cent for steel and 10 per cent for aluminum,” says the agreement.

Canadian negotiators persuaded their American counterparts to accept that position — a compromise that could allow the Trump administration to holster one of its favourite new trade weapons, while claiming to have enlisted the help of an ally in its ongoing fight.

“We have always said we are not the problem and that USMCA wouldn’t pass as long as the tariffs were in place. We would never accept a hard quota. I think they finally heard us,” said one source, speaking on the condition of anonymity, citing the delicate new phase of the negotiations.

“Now we can work together to deal with overproduction outside of North America and approve the improved free-trade deal.”

Dan Ujczo, a trade lawyer and Canada-U.S. specialist in Columbus, Ohio, said discussions among the three countries have now moved to creating “enhanced monitoring” and “anti-circumvention measures” relating to non-North American steel imports, including strict new rules of origin for steel and aluminum.

“While companies may celebrate a top-line without a hard quota, the devilment will be in the details.”
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