Canada and Mexico rebuke Trump’s ‘fair’ Nafta deal to waive new tariffs

President Donald Trump on Monday caused upset to the US’ neighbours after he expanded his personal trade war, telling Canada and Mexico that he would only consider lifting possible tariffs on steel and aluminium if they concede to White House demands for renegotiating the North American Free Trade Agreement.

Canada and Mexico pushed back against Trump’s attempt at strong-arming, setting the stage for a tense end to the latest Nafta talks.

The two US trading partners have threatened retaliation unless they are exempted from the planned tariffs, which have rattled financial markets. Both Canada and Mexico send more than 75 per cent of their goods exports to the United States.

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The three Nafta partners – Canada, Mexico and the United States – have been locked in talks aimed at possibly revamping the trade deal, but no clear framework has so far emerged.

Mexican Economy Minister Ildefonso Guajardo on Monday said that negotiators were close to concluding “a number” of chapters in the pact as he spoke in Mexico City with officials from the United States and Canada at the end of the seventh round of negotiations.

Canada would view any tariffs on steel or aluminium as unacceptable and will take appropriate measures to defend workers and industries if needed, Canadian Foreign Minister Chrystia Freeland said.

US trade envoy in Mexico City reiterated that tariff exemptions will apply to Canada and Mexico after a Nafta deal is reached.

“Mexico shouldn’t be included in steel & aluminium tariffs. It’s the wrong way to incentivise the creation of a new & modern Nafta,” Economy Minister Ildefonso Guajardo said on Twitter.

Canadian Finance Minister Bill Morneau said Ottawa is now negotiating Nafta with a partner that has “changed the terms of the discussion,” referring to the United States.

Like almost every broadside over trade war so far, his latest message was sent in a Twitter post with little explanation.

Trump tweeted: “We have large trade deficits with Mexico and Canada. Nafta, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and aluminium will only come off if new & fair Nafta agreement is signed. Also, Canada must

“ … treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the US They have not done what needs to be done. Millions of people addicted and dying.”

He also demanded that Mexico do more to prevent drugs from entering the United States as one of the conditions for lifting upcoming steel and aluminium tariffs announced last week.

The measures hit Canada particularly hard. It is the top exporter to US markets of both steel and aluminium. Canada is also the biggest importer of US steel and aluminium.

Trump on Thursday surprised much of Washington – and his own staff – by announcing that he would impose a 25 per cent tariff on steel and a 10 per cent tariff on aluminium. A formal announcement is expected this week or next. Commerce Secretary Wilbur Ross and top trade adviser Peter Navarro are both supportive of the tariffs, but even they were hard pressed to explain how the new restrictions would work.

Trump had originally said he wanted tariffs on steel and aluminium as a way to address what many view is a global oversupply of Chinese production, which has pushed down prices and harmed the US steel and aluminium industries. But China does not export much steel and aluminium to the United States, making it hard to directly limit their production unilaterally.

In his Twitter posts on Monday, Trump for the first time made explicitly clear that Canada and Mexico would not be exempted from these tariffs.

Canada and European Union officials have both said they would likely retaliate with tariffs on US goods if the White House imposed tariffs on steel and aluminium. Trump, in response, claimed he could win a trade war easily.

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Monday’s attacks on Canada and Mexico come two days after Trump singled out Germany, threatening to impose a tax on all European auto imports brought into the United States.

Trump tweeted: “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

Trump believes that because the United States buys more from other countries than it exports, there is a huge trade imbalance that disadvantages US workers and companies. He has vowed to use whatever tools necessary to change this, but many economists and others warn that tariffs and protectionist policies could hurt the overall US economy.

In the latest Nafta talks, Mexican and Canadian envoys are expected to press the US delegation for details on Trump’s tariff plan and options to be excluded.

Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, said the tariff issue would be “front and centre” in the Nafta haggling.