Canada will have a hard time sticking to tough talk on steel tariffs during USMCA ratification

Farmers and ranchers across North America have lobbied hard for the continuation of NAFTA and now the ratification of the USMCA. Ratification, however, seems elusive and is stalled for different reasons in all three signatory countries. One of the major obstructions is the section 232 steel and aluminum tariffs still in place.

Canada has temporarily planted its flag in the ground on USMCA ratification based on these tariffs still being an issue.

Recently, Canadian foreign Affairs Minister Chrystia Freeland said, ““I think for Canadians, the 232 steel and aluminum tariffs from the outset have been of huge concern to our country. They are illegal, they are unjustified, and they are, frankly absurd.”

This week, Iowa Senator Chuck Grassely stated that although he does not agree with the tariffs, the USMCA and tariffs are “on different tracks.”

The Prime Minister himself has stated publicly that Canada will not ratify the deal without a lifting of the tariffs.  This is similar tough talk the Liberal government provided during the USMCA negotiations but ultimately caved in the end. In this case, they are talking tough again but can they hold this position long term through the summer and fall?

My theory is that U.S. President Donald Trump can force Trudeau’s hand by withdrawing from the original NAFTA. There is speculation that Trump will withdraw to force congress to vote on the new USMCA to avoid losing a North American trade pact all together even if all sides have gripes with the USMCA. This would foil Canada’s tough talk quickly, in my opinion.

Like congress, Canada will not be able to afford sticking to “remove section 232 tariffs, or else.” President Trump could leave the tariffs in place and force a USMCA ratification domestically and in Canada.

Also don’t forget about the 2020 election that is not that far away, as Trump will need the votes of the “Rust Belt” to get the re-election he desires. Meanwhile he is in limited danger of losing the rural/agriculture vote, so dragging this out is to his vote-number advantage.

 

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