A deal with the Trump administration for tariff relief on Canadian steel and aluminum exports to the U.S. is likely to happen soon, says a former top Canadian trade negotiator.
Tim Sargent was Ottawa’s deputy minister of international trade from 2016 to 2018, while the Canada-U.S.-Mexico Agreement (CUSMA) was being negotiated during Donald Trump’s first term as president.
Sargent told an audience in Washington on Wednesday that there is a renewed impetus to the negotiations on steel and aluminum since Trump hosted Prime Minister Mark Carney at the White House earlier this month.
“It’s in the U.S.’s economic self-interest to come to an agreement on these areas,” Sargent said during a panel discussion at the Center for Strategic and International Studies, a Washington think-tank.
“Both parties have an interest in settling these quite soon,” he added.
In a subsequent interview, Sargent said he would not be surprised if an agreement on steel includes what’s called a tariff-rate quota: allowing a set amount of Canadian steel into the U.S. each year with zero or minimal tariffs, then dramatically higher tariffs on all imports exceeding the annual quota.
Sargent says the Trump administration is increasingly hearing pushback from American manufacturers against tariffs on Canadian products along these lines: “Why are you putting up the price of my intermediate inputs? All you’re doing is making me less competitive with foreign imports into the U.S.”
The U.S. has had a 50 per cent tariff on steel and aluminum imports from Canada and much of the rest of the globe since June.
At the end of his Oct. 7 meeting with Carney, Trump directed his two top trade officials —Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer — “to quickly land deals” on steel, aluminum and energy, according to Canada-U.S. Trade Minister Dominic LeBlanc.
Such a deal could be ready for Trump and Carney to sign at the Asia-Pacific Economic Cooperation (APEC) summit at the end of this month, the Globe and Mail reported this week, citing two unnamed sources.
“The president does like things that he calls deals,” Sargent said. “The prospect of being able to get in front of the cameras at APEC with his new friend the prime minister of Canada and announce a deal has, I think, some appeal for the president.”
Carney and his team did not outright deny the Globe and Mail report, but are trying to dampen expectations of a deal in time for the summit.
“We’ll see. We are in ongoing discussions with the Americans, and I wouldn’t overplay it,” Carney told reporters in Ottawa on Tuesday.
The negotiations are “into a level of detail that we hadn’t seen previously, but we still have work to do,” LeBlanc added.
While Sargent is optimistic for the prospects of a quick deal to reduce tariffs on steel and aluminum, he’s pessimistic about the chances that the renegotiation of CUSMA will bring about a true free-trade deal with an administration as protectionist as Trump’s.
“The big challenge for Canada — and I expect it’s true for Mexico as well — is there isn’t a lot left that the U.S. wants in terms of market access,” he told the panel on the future of North American trade and security.
It means Canada faces renegotiating a free-trade agreement with a partner that actually wants less free trade and is actively cutting holes in the existing deal.
“The big fear is [CUSMA] becoming a Swiss cheese of an agreement,” Sargent said.
Philip Luck, a former deputy chief economist at the U.S. State Department, told the panel the best hope for Canada and Mexico to get carveouts from tariffs on steel, aluminum and automobile imports is the Trump administration shifting its attention to the impact of China on the U.S. economy.
The way the North American trade talks play out over the next year will depend largely on “how much the focus of the administration is on domestic production and bringing back manufacturing to the United States, versus how much the focus is on limiting our exposure to certain other economies, namely China,” Luck said.
