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Trump links tariffs concessions to NAFTA progress

US President Donald Trump has suggested Canada and Mexico could win exemptions to his planned tariffs on steel and aluminum if they agree to a new free trade deal. Ottawa said this was "absolutely unacceptable."

Trump's tweet on Monday comes as his administration is currently renegotiating trade relations with Canada and Mexico under the 1994 North American Free Trade Agreement (NAFTA), in which the US president is seeking what he called a better deal for American workers.

Donald Trump warned the two countries that they could only avoid stiff US tariffs on their exports of steel and aluminum "if (a) new and fair NAFTA agreement is signed."

"We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies and jobs," he tweeted.

On Thursday, Trump unveiled plans for import duties on steel and aluminum of 25 percent and 10 percent respectively, saying the measure was intended to revive the industries in the US.

Read more: Opinion: Trump, tariffs and reality

In further comments on the NAFTA talks, he also said Canada needed to "treat our farmers much better" and that "highly restrictive Mexico must do much more on stopping drugs from pouring into the US."

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NAFTA talks

The latest round of negotiations on an update of NAFTA ended in Mexico City on Monday with agreement reached on three of 33 chapters.

The talks had "not made the progress that many had hoped in this round," US trade representative Robert Lighthizer said, adding that the US was prepared to "move on a bilateral basis" if no tripartite agreement could be reached.

At a press conference in Mexico City, Canadian Foreign Affairs Minister Chrystia Freeland said the planned tariffs were "absolutely unacceptable." She added that if restrictions are imposed on Canadian products, Ottawa would take "appropriate responsive measures to defend our trade interests and our workers."

The next round of renegotiations, which began at Trump's instigation, are due to take place in Washington in April.

Read more: Auto giants launch new coalition to save NAFTA

While the new tariffs are clearly aimed at China, which the US and others complain has been flooding global markets with cheap subsidized metals, the main impact is expected to be felt by allies such as Canada and Mexico.

Canada is the largest foreign supplier of the metals to the US, while Mexico was the fourth largest in 2017, accounting for just under 10 percent of US imports. When President George W Bush imposed steel tariffs in 2002, both Canada and Mexico were excluded, which helped limit the economic damage.

Mexican countermeasures

Trump's remarks on Monday are another sign that the US president is willing to escalate his protectionist agenda. Already at the weekend, he had aimed his fire at the EU, threatening to impose new taxes on European carmakers if the bloc retaliated against his steel and aluminum tariffs.

Read more: Trump's tariffs on European cars — a massive own goal?

With regard to Mexico, a Mexican source close to the NAFTA talks said that Trump's strategy aimed at "misusing national security provisions to provide quick and immediate relief to a sector" would violate NAFTA and World Trade Organization (WTO) rules.

Mexico could trigger NAFTA dispute resolution mechanisms in response, the source told the British business daily Financial Times.

Trump is expected to issue a formal order later this week and officials from Canada, Mexico and other countries have been scrambling to secure exemptions.

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uhe/jbh/jd (Reuters, AP)

 

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