WASHINGTON—The U.S. and Canada have agreed to drop their tariffs on each other’s steel and aluminum and all related retaliatory tariffs, removing a major source of friction between the two countries and a key obstacle to the ratification of the new NAFTA.
Prime Minister Justin Trudeau is expected to announce the agreement in an appearance with Stelco steelworkers in Hamilton at 1:30 p.m. Trudeau spoke with President Donald Trump earlier today.
Trump’s administration had insisted for months that the tariffs on Canada would not be lifted without quotas being imposed in their place. But Trudeau objected, and the deal does not include quotas, two Canadian sources said. The details of what Trudeau did agree to were not immediately available.
The tariffs are expected to be eliminated by next week.
Trump imposed a 25 per cent tariff on steel and 10 per cent tariff on aluminum from Canada, Mexico and other countries just under a year ago, controversially using a “national security” provision of U.S. trade law. Trudeau responded with equivalent tariffs on U.S. steel and aluminum, plus dozens of other products produced in parts of the country critical to Trump’s political coalition.
Trump had faced pressure to rescind the tariffs from Canada, his party and his voters.
Trudeau’s government had warned Trump that Parliament would not hold a vote to approve the new NAFTA, one of his top policy priorities, if the tariffs remained in place. Senior Republican legislators told Trump that Congress also wanted the tariffs removed before holding a vote. And farmers and business groups in Trump-friendly rural states complained that they were being hurt by the retaliatory tariffs from both Canada and Mexico.
The U.S. has also come to an agreement to lift its steel and aluminum tariffs on Mexico.
While the tariffs are a key impediment to getting the new NAFTA approved, several other hurdles will remain. The Democrats who control the U.S. House of Representatives have demanded changes to provisions on intellectual property protections for certain sophisticated pharmaceuticals known as biologics, and they have demanded new provisions to allow for stronger enforcement of labour standards.
Trump’s tariffs have tested the bilateral relationship with Canada, especially during the NAFTA negotiations last year.
Trudeau had called the tariffs illegal and insulting, arguing that Canadian industry should never be considered a national security threat to the United States. Trump had taken offence to Trudeau’s pushback, at one point dispatching senior aides to publicly disparage the prime minister.
Trump had initially suggested that he was merely using the tariffs to increase his leverage in NAFTA talks. But he then made clear that he saw the tariffs as effective policy in their own right, calling himself a “tariff man” and crediting the tariffs for a revival of the U.S. steel industry.
Supporters of his tariffs argue that they have resulted in major factory investments and more than 10,000 steel and aluminum jobs being created or saved. Critics have noted that the tariffs harm the far larger number of people who work for companies that use the steel and aluminum the tariffs have made more expensive, plus millions of consumers and shareholders.
Tariffs are taxes on imports. They are paid by the importer. For example, under Trump’s 25 per cent tariff on Canadian steel, an American company buying $100 worth of Canadian steel pays the U.S. government $25.
Daniel Dale is the Star’s Washington bureau chief. He covers U.S. politics and current affairs. Follow him on Twitter: @ddale8