The Canadian auto industry is relieved a side deal in the proposed trade agreement with the United States and Mexico lifts the threat of tariffs, but the steel and aluminum sectors will have to wait as negotiators bargain over removing metal duties imposed by U.S. President Donald Trump.
The United States-Mexico-Canada Agreement unveiled on Sunday night has provisions that are expected to benefit the U.S. and Canadian auto industries, including requiring 75 per cent of a car be produced in North America, up from 62.5 per cent, and U.S. quotas that are far above Canadian exports.
Gone is Mr. Trump’s threat of a 25-per-cent tariff on auto imports, a move that would have imperilled a Canadian industry that relies on U.S. exports for almost 90 per cent of its sales and employs 130,000 people, most of them in Ontario. The trilateral agreement covers US$1-trillion in trade, including agricultural products, intellectual property and online-consumer purchases.
But steel and aluminum tariffs remain. The import taxes of 10-per-cent on aluminium and 25-per-cent on steel were first levied by Mr. Trump in June, and mirrored by Canada and other countries.
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Mr. Trump told reporters on Monday the tariffs on Canada and Mexico will remain "until such time as we can do something like quotas so our industry is protected. We are working on that now. That wasn’t part of this,” Mr. Trump said.
Speaking at the same press conference, Robert Lighthizer, the U.S. trade representative, said the free-trade deal and the metal tariffs "are two separate things.”
"We know that they are of grave interest to both countries,” he said. "We are engaging in talks now with an effort to preserving the effect of our program and still take care of [Canada and Mexico’s] needs. Hopefully, we’ll be able to work that out.”
Prime Minister Justin Trudeau said at a news conference on Monday that talks would continue on lifting the metal tariffs. He said protecting the auto industry was a key goal of negotiators.
The new agreement allows Canada to send 2.6 million passenger cars tariff-free to the United States in a year, well above the current level of 1.7 million. The high cap removes a tariff threat for a high-cost industry that has struggled to secure commitments from auto makers to build cars in Canada.
Canadian negotiators "have done an outstanding job of getting us into the agreement,” said Mark Nantais, head of the Canadian Vehicle Manufacturers' Association, which speaks for Ford Motor Company, General Motors Company and Fiat Chrysler Automobiles.
Jerry Dias, head of labour union Unifor, said the deal’s improved country-of-origin provisions and higher wage floors for Mexican factories put the domestic industry on a better footing for growth. “As it relates to auto, we’re in better shape than we’ve been in the last 24 years,” Mr. Dias said.
Still, the steel and aluminum industries remain on the sidelines, even as tariffs erode sales and disrupt supply chains. They are urging the three sides to agree to drop the taxes in the 60 days before the agreement is signed.
Ken Neumann, Canadian director of United Steelworkers, criticized the Canadian government for engaging in "concession bargaining” rather than focusing on eliminating the tariffs. "Canadians expected that an agreement on NAFTA would result in the U.S. lifting the bogus national-security tariffs on Canadian steel and aluminum. Instead, it appears Canadian steel and aluminum workers are among those being sacrificed in the concessions made by the Liberal government in this deal,” he said.
Jean Simard, who speaks for three large aluminum producers in Canada – Alcoa Canada Ltd., Rio Tinto Alcan Inc. and Aluminerie Alouette Inc. – said industry representatives will be working alongside their U.S. counterparts to demand exemptions from the tariffs. "I think Canada is going to put a lot of emphasis on the tariffs because aluminum is one of the key strategic sectors in Canada in terms of competitiveness,” he said.
With a report from Erin Anderssen