Remember When The USMCA Was The Be All And End All Of Trade Agreements?

One of the hallmarks of the great negotiators regime was supposedly the new USMCA (United States–Mexico–Canada Agreement)…the perfect free trade agreement. And a vital agreement replacing NAFTA (North American Free Trade Agreement) that was so unfair to the United States…and allowed Mexico and Canada…to take advantage of us.

The USMCA took affect for all signatories on July 1, 2020. And President Donald Trump’s happiness lasted about a month.

U.S. President Donald Trump unveiled his plan to reimpose 10% tariffs on Canadian aluminum products on Aug. 6. The tariffs came into effect Aug. 16.

Shouldn’t the original USMCA have a mechanism to resolve trade disputes? If not, shame on the negotiators. And if it does have such a mechanism, why is the US again imposing tariffs on our free trade partner, Canada? One of the major areas of negotiations in USMCA was exactly steel and aluminum tariffs. So this is truly a WTF moment in North American trade. And the president’s reasoning? Well it appears to be same old same old:

“Canada was taking advantage of us, as usual,” Trump said during a lengthy, campaign-style speech at a Whirlpool manufacturing plant in Ohio.

“The aluminum business was being decimated by Canada,” he said. “Very unfair to our jobs and our great aluminum workers.”

So what happened to his stellar trade achievement, USMCA? Or was President Trump once again falling back on old habits and reneging on a business deal?

But never fear, Canada isn’t one to ignore a slight! So Monday:

At a press conference in Ottawa, Trudeau indicated new duties will be announced later in the day. The Canadian government has been looking at more than 60 U.S. aluminum-containing products that could face higher tariffs, planning dollar-for-dollar equivalent tariffs worth C$3.6 billion ($2.7 billion) against the U.S.

“I want to highlight that we will be taking action to counter the unjust tariffs put on Canadian aluminum,” Trudeau said ahead of a meeting with his cabinet. “We will always be there to defend Canadian workers, defend our aluminum sector.”

So what happened in Washington on Tuesday?

President Trump backtracked on his decision to reimpose 10 percent aluminum tariffs on Canada on Tuesday, hours before Ottawa was set to announce retaliatory measures.

“After consultations with the Canadian government, the United States has determined that trade in non-alloyed, unwrought aluminum is likely to normalize in the last four months of 2020, with imports declining sharply from the surges experienced earlier in the year,” the office of the United States Trade Representative said in a statement.

So the tariffs were removed…some face was saved in Washington…and Canada came away looking pretty good at trade negotiations. And what do US business interests think?

“What American manufacturers need now is certainty that these tariffs won’t make another reappearance,” said Chamber of Commerce Executive Vice President Myron Brilliant. “Setting aside these threats once and for all will allow American job creators to focus on economic recovery.”

What was the president thinking here? Why would he reimpose tariffs just a month after his new agreement went into effect? And it is HIS agreement because Mexico and Canada were doing just fine with NAFTA. Is this an admission that USMCA isn’t as tough as he claimed it was? Does he think he can just run roughshod over Canada and Mexico? Right now doesn’t Canadian Prime Minister Justin Trudeau look like the tougher abler negotiator?

And if this was just a campaign tactic to look tough on foreign trade and protecting American jobs…is anyone really paying attention? And don’t tariffs on imported metals increase the cost of raw materials, increase the cost of finished goods, and reduce demand…and therefore reduce jobs at US manufacturers? Isn’t that pretty much Econ 101 stuff? Once again the president displays his ignorance of how tariffs work and their effects on the overall American economy.

And he once again reveals to world leaders that his word can’t be trusted…even with his scribble signature affixed to it.


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