Aug 17, 2020 11:09 AM

After more than two years of intimidating and imposing trade sanctions on Canada and Mexico, President Donald Trump forced the two neighbors of the United States to agree to replace the 25-year-old NAFTA with a trade agreement of their own choosing.

The Trump pact, created to update the old treaty and stimulate greater manufacturing production in the United States, was expected to restore clarity and predictability to the rules governing the United States' trade with Canada and Mexico, which reaches 1.4 trillion dollars. dollars annually.

The tranquility did not last long.

Less than a month after the Mexico-United States-Canada Agreement (T-MEC) entered into force on July 1, the Trump administration plans to reimpose a 10 percent tax on Canadian aluminum imports on Sunday. , generating tensions between both allies.

Trump accuses Canada of flooding the US market with raw, unprocessed aluminum. The Aluminum Association, which represents US and foreign companies in the sector and opposes the tariffs, responded that the increase in Canadian crude aluminum shipments to the United States is within historical norms and reflects the increase in the production of a Canadian foundry that was closed due to a labor dispute.


“Our hope is that the government will reconsider this decision,” Kirsten Hillman, the Canadian ambassador to the United States, said in an interview. In retaliation, Canadians are preparing to impose tariffs on aluminum and other American products. Trump's reimposed tariffs will raise costs for car companies and other US manufacturers that use imported aluminum in their products. As a result, Hillman said, "it's going to be more expensive to buy a car or truck or parts for your vehicle." In 2018, Trump imposed tariffs on aluminum imports, including from Canada. He alleged that the imports threatened to bankrupt US aluminum producers, putting the wartime access of the US military to the metal at risk. To justify the tariffs, Trump invoked the rarely used Section 232 of the Trade Expansion Act of 1962 and declared aluminum imports a threat to national security. Critics say the tariffs do little to address the biggest problem facing the aluminum industry: a massive overproduction from China that has flooded global markets and drove prices down. The Asian country was hardly affected by Trump's tariffs because its aluminum exports were already restricted due to previous trade sanctions from the United States. Last year Trump agreed to cancel the tariffs for Canada and Mexico in order to contribute to the completion of the T-MEC.

But two US aluminum producers - Century Aluminum and Magnitude 7 Metals - had complained even before the T-MEC went into effect that Canada was taking advantage of the cancellation of tariffs to flood the United States with aluminum.

A new trade group representing them, the Major Aluminum Association of the United States, claims that Canadian crude aluminum imports increased 37 percent in the second quarter of 2020 compared to the same period of 2019.

For this reason, Trump chose to reimpose the tariffs on Canadian aluminum in accordance with the precepts of national security provided in Section 232.

"To top it all, this is being done considering that Canada poses a threat to the national security of the United States," Hillman said. Troops from both countries have fought shoulder to shoulder as allies in conflicts ranging from World War I to Afghanistan.

Hillman and other critics say the tariffs are unlikely to benefit US producers. Instead, they claim, other countries will simply replace Canadian imports.

Potential beneficiaries include Glencore, the Swiss-based global commodities trading company that also has a large stake in Century Aluminum and which this year acquired Russian aluminum for $ 16.3 billion. Glencore declined to comment.

The US Major Aluminum Association rejected the argument that Canadian aluminum tariffs could end up stimulating imports from countries like Russia and not benefit US producers. The aluminum industry employs less than 60,000 people in the United States. Economist Christine McDaniel of the Mercatus Center at George Mason University estimates that the aluminum-consuming industries likely to be hurt by higher tariff costs employ 10.7 million, or roughly 180 workers for every one who works in the aluminum.

Source: La Jornada