Trump Links Planned Steel Tariffs to Nafta Renegotiation Effort -- 2nd Update

03/05/18 02:13 PM EST
By William Mauldin 

WASHINGTON -- President Donald Trump on Monday sought to use his threat to slap tariffs on steel and aluminum imports as leverage to extract concessions from top trading partners, warning Mexico and Canada that their metal exports would be penalized until they agree on a plan to overhaul North America's trading system.

Mr. Trump upset U.S. allies and trading partners last week by saying he would impose tariffs on steel and aluminum imports from around the world. Trump administration officials have said no nation would be exempted from the duties, and on Monday the president signaled he would use those planned imports duties to pressure Canada and Mexico in negotiations over the renewal of the North American Free Trade Agreement, or Nafta.

"Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed," Mr. Trump said in a morning tweet, as top Mexican, Canadian and U.S. officials gathered in Mexico City to discuss the 1994 pact.

In the Oval Office later, Mr. Trump said, "We had a very bad deal with Mexico, we had a very bad deal with Nafta," and said the U.S. had been "ripped off" by its trading partners.

Many lawmakers agree with Mr. Trump that the pact has major flaws that need to be addressed, but few if any on Capitol Hill want to withdraw from the deal without having an immediate replacement.

The president appears keen to use countries' eagerness to preserve exports to the U.S. to win concessions on existing trading relationships or to open new markets. At the same time, Mr. Trump has said tariffs could protect U.S. workers, especially steel producers in Pennsylvania, Ohio and other states.

Economists warn the approach could backfire. Threats from the White House could make it politically difficult for foreign governments to make concessions to the U.S. Mr. Trump is also facing opposition to broad tariffs within his administration, from GOP lawmakers on Capitol Hill, and among the business community. Consumers would be affected if metal-consuming industries such as beer brewers and auto makers pass along the costs of the proposed tariffs by raising prices.

"He's opened up this Pandora's box," said Chad Bown, senior trade expert at the Peterson Institute for International Economics, which opposes the tariffs. "It puts you in a potential state of chaos, because you have to be worried about how everyone else will respond as well."

The head of the World Trade Organization issued a pointed warning Monday against the path Mr. Trump has taken.

"We now see a much higher and real risk of triggering an escalation of trade barriers across the globe," Roberto Azevêdo, the WTO's director general, told a meeting of the Geneva organization's members. "Once we start down this path, it will be very difficult to reverse direction. An eye for an eye will leave us all blind and the world in deep recession."

Mr. Trump said last week that "trade wars are good, and easy to win," though on Monday at the White House he said he didn't believe the new tariffs would ignite one.

"I don't think you're going to have a trade war," he said.

Two hours after Mr. Trump's initial tweet on Monday, Mexican Economy Minister Ildefonso Guajardo said on Twitter that including his country in steel and aluminum tariffs would be "the wrong way to incentivize the creation of a new & modern #Nafta."

Mr. Guajardo was set to join Mr. Trump's trade representative, Robert Lighthizer, and Canada's foreign minister, Chrystia Freeland, Monday in Mexico City to assess progress in the latest round of Nafta talks.

Mexican officials say the country's presidential election this summer limits the degree of concessions the ruling party can make to Mr. Trump in Nafta talks without bolstering a rival populist candidate. Meanwhile, Mr. Trump's disparaging comments about Mexican immigrants and repeated claims that Mexico would pay for a border wall have weighed on the talks.

Still, Mexican officials have shown more willingness to compromise on Nafta than have their Canadian counterparts, leading Trump administration officials to hint that Canada could be excluded from a renegotiated Nafta. Mr. Trump said Monday that Canada "must treat our farmers much better. Highly restrictive."

Canadian Prime Minister Justin Trudeau on Friday called the metals tariffs plan "totally unacceptable" and said last month that "no deal might very well be better for Canada than a bad deal." Canada is the biggest U.S. supplier of aluminum, shipping about $7 billion last year.

Mr. Trump's linkage of metal tariffs to renegotiation of an existing trade pact could reverberate well beyond North America.

The U.S. is seeking changes in a free-trade agreement with South Korea, a major steel producer and historically a supplier of pipe to the U.S. oil and gas industry. The European Union has said it would retaliate against American exports if Mr. Trump follows through with the metals tariffs, to which Mr. Trump in turn threatened trade barriers against European cars, a much larger part of global trade than metals.

Looming largest in the steel and aluminum fight is Beijing, which the Trump administration has identified as the source of the global steel glut blamed for weighing on prices and putting the American industry at risk.

Yet a battery of trade cases against allegedly dumped and subsidized Chinese steel and aluminum have already limited U.S. imports from that country, reducing any further leverage Mr. Trump might gain from his current plan to impose global tariffs of 25% on steel and 10% on aluminum. The administration is pursuing a separate trade case against Chinese violations of U.S. intellectual property rights, and that effort could end in broad tariffs on Chinese goods.

The U.S. law that allows for the metal tariffs includes a provision to allow countries to negotiate a plan to eliminate the source of the national-security threat -- in this case the global glut of metal.

"The ideal solution in a case like this would be a global agreement on overcapacity in which all producers agree to cuts, some much bigger than others," said Bill Reinsch, trade expert at the Center for Strategic and International Studies.

So far, the Trump administration hasn't signaled an openness to talks.

"The president is clear about this and there's no backing off from this in the sense that this is the minimum we need in order to defend our industries from extinction," senior trade adviser Peter Navarro said Monday on Fox Business Network.

--Peter Nicholas in Washington and Andrea Thomas in Berlin contributed to this article.

Write to William Mauldin at


(END) Dow Jones Newswires

March 05, 2018 14:13 ET (19:13 GMT)

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