Canada Won’t Ratify USMCA Trade Deal If Metals Tariffs in Place

Canada is ratcheting up pressure on the U.S. to lift tariffs on steel and aluminum — threatening to hold up the new continental trade deal and change up its own retaliatory tariffs to have a bigger impact.

The U.S., Canada and Mexico signed their new trade deal Nov. 30, but it still needs to be ratified by lawmakers in all three countries and time is running out in Canada before the next election. There are increasing calls from U.S. lawmakers to lift the tariffs in a bid to smooth passage of the trade deal.

Canada’s foreign minister, Chrystia Freeland, this week issued a warning that Canada would only move forward on ratification when other countries do, and that it may change its tariffs on the U.S. Meanwhile, another envoy said flatly that Canada won’t move ahead on ratification so long as the U.S. tariffs remain in place, and that they fear U.S. President Donald Trump wants to keep the tariffs until the trade deal is ratified.

“I think we’re quite firm that we’re not moving ahead on ratification without the tariffs being lifted, and I think Mexico has signaled the same message,” Joe Comartin, Canada’s consul general to Detroit, said in a telephone interview Thursday after visiting members of Congress in Washington last week. Time is running out in Canada and the U.S., he said. “There’s a real risk at this point that if we don’t move very quickly in both countries that it won’t be passed before the next election in the United States.”
 

Pelosi Pressure

U.S. House Speaker Nancy Pelosi has been pushing for certain changes in exchange for advancing the trade deal, including tougher enforcement of labor rules in Mexico — though she said Thursday she won’t leverage the deal to advance other Democratic priorities. Regardless, the metals tariffs are a barrier.

Freeland, speaking Wednesday in Ottawa, said that every country is now responsible for its ratification process, but warned Canada wouldn’t leap ahead and ratify if the other two nations aren’t doing the same.

“We think that the best approach for Canada, and really best approach for all the Nafta countries, is for us to move forward in a coordinated way when it comes to the Nafta ratification,” she said. “That is the approach Canada is taking and will be taking.”

Freeland underscored the message Thursday in Washington, and warned against any push to reopen the deal to address Pelosi’s concerns.

“Canada’s view is we’ve done our deal,” she told reporters Thursday. “People need to be very careful around opening up what could really be a Pandora’s box.” Many Canadians have a hard time understanding how Canada could ratify the deal if the tariffs remain in place, she said.

New Tariffs?

The U.S. applied 25 percent steel tariffs and 10 percent aluminum tariffs to Canada last year, and Canada responded with dollar-for-dollar proportional tariffs of its own on U.S. steel, aluminum and other products. Freeland called on the U.S. to lift the tariffs and said she was encouraged by calls from key U.S. lawmakers to do so, but also said Canada might switch its tariffs to different products to make a point.

“We are always looking at whether the list we have is the right one — both for Canada and also to have the greatest impact. That is an ongoing discussion,” she said.

Pressure Tactic

Comartin said there’s overwhelming support in the U.S. for lifting the tariffs, but that Canada is hoping to keep up the pressure. That said, the president hasn’t indicated any willingness to lift the tariffs.

“It still seems that the president and the immediate advisers feel they’ll be keeping them on,” he said, later adding: “That’s what the president thinks — that in fact, by keeping these on, it’s leverage on the House of Representatives, the Democrats in particular. And the reality is just the opposite.”

Canada has not yet introduced legislation to ratify the deal to the House of Commons, and the clock is running to do so. The country would need to pass any such legislation by the second or third week in June if it wants it to clear lawmakers before the summer recess and election, he said.

James Moore, a former Canadian industry minister who served on Freeland’s advisory council in trade talks, said time is running out in Canada’s parliament to pass the deal. “Certainly I think now is the time to raise the alarm bells,” Moore told BNN Bloomberg television Thursday. “All of this is really starting to get wrapped up in the domestic politics in all three arenas.”