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Mexico is the fourth largest supplier of aluminum to the US. Mexico is the fourth largest supplier of aluminum to the US.

Mexico exempt from new tariffs—for now

Exemption on steel, aluminum tariffs hinges on 'a fair NAFTA agreement'

United States President Donald Trump announced yesterday that Mexico and Canada will initially be exempt from new tariffs on steel and aluminum imports that will take effect in two weeks.

Trump cited the close relationship between the three countries, including national security ties, as justification for the decision.

But he also continued to frame the exemption as conditional on reaching an updated North American Free Trade Agreement (NAFTA) that better favors the United States.

“Due to the unique nature of our relationship with Canada and Mexico, we’re negotiating right now NAFTA, we’re going to hold off the tariffs on those two countries to see whether or not we’re able to make the deal on NAFTA . . .” he said.

“I have a feeling we’re going to make a deal on NAFTA. I’ve been saying it for a long time,” Trump added. “If we do, there won’t be any tariffs on Canada or Mexico.”

The U.S. president first suggested in a Twitter post Monday that the two countries could be exempt from the 25% steel and 10% aluminum tariffs “if a new and fair NAFTA agreement is signed.”

A White House official said Wednesday that a 30-day exemption may be applied to Mexico and Canada but Trump didn’t confirm any planned timeframe in relation to the exemption. Whether the exemptions become permanent remains to be seen.

Following the announcement, United States Secretary of Commerce Wilbur Ross told CNBC that “there’s no question that the action the president took today is a further motivation to both Canada and Mexico to make a fair agreement with the United States.”

However, Ross rejected that the tariffs were part of a “negotiating ploy” to update NAFTA.

Nevertheless, during his announcement yesterday, Trump repeated his threat to pull out of the 24-year-old trade agreement if it cannot be reworked to his liking.

“If we don’t make the deal on NAFTA and if we terminate NAFTA because they’re unable to make a deal that’s fair for our workers and fair for our farmers . . . and fair for our manufacturers, then we’re going to terminate NAFTA and we’ll start all over again or we’ll just do it a different way,” the president remarked.

United States Trade Representative Robert Lighthizer said at the conclusion of the seventh round of renegotiation talks in Mexico City earlier this week that the U.S. could seek bilateral deals with Mexico and Canada separately if needed.

Despite lingering uncertainty about how long the exemption will last, the Mexican peso rose against the US dollar after the president’s announcement and the Canadian dollar also regained ground it had lost against the greenback.

In a statement in response to the exemption, Mexico’s Economy Secretariat said that Mexico recognizes the problem of global steel oversupply, adding that “the negotiation process for the modernization of NAFTA is running its normal course.”

Economy Secretary Ildefonso Guajardo has previously said that NAFTA talks are “independent” of Trump’s tariff actions.

Canadian Foreign Minister Chrystia Freeland told reporters in Toronto that NAFTA is “a completely separate issue.” However, she welcomed news of the exemption, saying “today is a step forward.”

She also said that Canada will push for a permanent exemption. Mexico, which is the fourth largest aluminum exporter to the U.S., is also expected to lobby strongly for a long-lasting exclusion.

Source: Bloomberg (en), Milenio (sp)

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