A former high-ranking Canadian trade negotiator believes that a deal between the Trump administration and Canada for tariff relief on Canadian steel and aluminum exports to the U.S. is imminent. Tim Sargent, who served as Ottawa’s deputy minister of international trade during the negotiations of the Canada-U.S.-Mexico Agreement (CUSMA) in Donald Trump’s first presidential term, stated that there is a renewed momentum in the discussions on steel and aluminum following a recent meeting between Trump and Prime Minister Mark Carney at the White House.
Sargent, speaking at the Center for Strategic and International Studies in Washington, emphasized the economic self-interest for the U.S. to reach an agreement on these issues, noting that both parties are keen on resolving them promptly. He suggested that a potential agreement on steel might involve a tariff-rate quota system, allowing a specific amount of Canadian steel to enter the U.S. each year with minimal or zero tariffs, while imposing substantially higher tariffs on imports exceeding the yearly quota.
The Trump administration has faced opposition from American manufacturers who are concerned about the impact of tariffs on Canadian products. Sargent highlighted that these manufacturers are questioning the price increases on their intermediate inputs, which could reduce their competitiveness against foreign imports into the U.S.
Since June, the U.S. has imposed a 50% tariff on steel and aluminum imports from Canada and other countries. Following a meeting with Carney on October 7, Trump instructed his top trade officials to swiftly finalize deals on steel, aluminum, and energy. There are indications that a potential deal could be ready for signing between Trump and Carney at the upcoming Asia-Pacific Economic Cooperation (APEC) summit, as reported by The Globe and Mail.
While Sargent remains hopeful for a speedy resolution on steel and aluminum tariffs, he expressed doubts about the prospects of CUSMA renegotiation leading to a comprehensive free-trade agreement with an administration marked by protectionist policies. He warned that the U.S.’s diminishing interest in market access poses a significant challenge for Canada and Mexico in renegotiating the trade deal, potentially turning CUSMA into a fragmented agreement.
Philip Luck, a former deputy chief economist at the U.S. State Department, emphasized that Canada and Mexico’s chances of securing exemptions from tariffs rely on the Trump administration shifting its focus towards addressing the impacts of China on the U.S. economy. The outcome of North American trade discussions in the coming year will hinge on the administration’s priorities regarding domestic production, manufacturing resurgence, and economic relations with China.
