Canada and Mexico both announced Monday they will lift tariffs they placed on the United States last year in retaliation for the Trump administration’s effort to pressure them during negotiations for the United States-Mexico-Canada Agreement on trade. That follows the U.S. agreeing Friday to exempt Canada and Mexico from its tariffs on steel and aluminum. The moves indicate the three governments are united on ensuring the passage of USMCA through their respective legislatures.
“With these developments, Canadian and American businesses can now get back to what they do best: working together constructively and supporting good, well-paying middle class jobs on both sides of the border. The removal of tariffs and countermeasures is a true win-win for everyone involved, and great news for Canadian and American workers, for our communities, and our economies,” Canadian Finance Minister Bill Morneau said.
Both Morneau and Mexico said the key reason they agreed to lift the tariffs was the U.S. ending the metals tariffs and not replacing them with a quota system or another limitation on trade. “The Ministry of Economy was always opposed to considering a solution via quotas, recognizing the potential distortions of a managed trade and its conviction that free trade will continue to strengthen the competitiveness and prosperity of North America,” Mexico said in a statement.
Canada placed tariffs of 10% to 25% on U.S. steel and aluminum, a variety of food products such as yogurt, coffee, jelly, and other products, including mattresses. Mexico placed tariffs of 5% to 25% on items including whiskey, pork, cheese, and apples and vehicles such as motorboats.
Canada and Mexico were initially exempted when the U.S. enacted tariffs of 25% on steel and 10% on aluminum last year. The White House removed the exemptions during the USMCA negotiations as a pressure tactic. It was widely assumed by those countries, as well as by U.S. lawmakers and the business community, that the exemptions would be restored once the trio reached a deal on USMCA, which would replace the 1994 North American Free Trade Agreement.
That deal was reached late last year, but the Trump administration resisted restoring the exemptions for months afterwards. U.S. Trade Representative Robert Lighthizer told Congress last year that allowing exemptions would undermine the point of the tariffs, which are mainly directed at China.
Canada and Mexico balked at ratifying USMCA as long as the tariffs were in place. Lawmakers from both parties urged the White House to go along, saying the tariffs were were doing the economy more harm than good. Many said USMCA was doomed in Congress otherwise.
The USMCA deal still faces other obstacles in Congress. Speaker Nancy Pelosi, D-Calif., has said the deal should be renegotiated to create strong enforcement mechanisms. Mexico and Canada oppose renegotiating the deal.
