President Trump recently announced that the “United States has been taken advantage of for many decades on trade” and he imposed a 25 percent tariff on imported steel and 20 percent on imported aluminum from Canada, Mexico and the European Union (EU). The reaction and retaliation were swift. Canada announced it will impose a surtax of $12.8 billion on U.S. steel, aluminum, coffee, candy, pizza and quiche. Mexico announced that it would tax imported pork bellies, apples, cranberries, grapes, certain cheeses and some steel. The EU had previously published a ten-page list of possible retaliatory products including American bourbon and Harley-Davidson motorcycles.
The automotive industry is obviously impacted by the current threats and as recent as May the Administration also opened a trade investigation into vehicle imports. In addition, a statement by the Motor & Equipment Manufacturers Association (MEMA) stated that “Industries like ours, which require long-term investments in facilities and employees, depend on regulatory and market stability. These actions have thrown all of that up in the air.”
Though the original steel and aluminum tariff threat was aimed at China, underlying the latest developments is the issue of the ongoing renegotiation of the North American Free Trade Agreement (NAFTA) which is stalled. Amongst the pending issues. the U.S. is demanding that Canada accept a “sunset clause” for the agreement for every five years.