Tensions Rise as Canada and Mexico Seek to Avoid Tariffs
Washington: Canada and Mexico are expected to intensify efforts this week to avoid punishing 25% tariffs on their exports to the U.S. in talks to persuade President Donald Trump’s administration that their steps to increase border security and curb fentanyl trafficking are working ahead of a March 4 deadline.
Canada and Mexico Have Taken Action
Canada and Mexico have both taken steps to beef up border security, which bought them about a month’s reprieve from the tariffs that could wreak havoc on a highly integrated North American economy.
Negotiations This Week
The negotiations this week, along with new reports from the Department of Homeland Security, will help determine whether the Trump administration extends the tariff suspension for longer, said Dan Ujczo, a lawyer specializing in U.S.-Canada trade matters. Even if that happens, he said, Trump will likely maintain the tariff threat at least until there’s clear evidence the border measures are halting migrant and fentanyl flows.
Progress Being Made on the Security Front
"There’s progress being made on the security front," said Ujczo, senior counsel with Thompson Hine in Columbus, Ohio. "But it’s overly optimistic to think that those tariffs would be fully rescinded."
More Tariff Threats
Since Trump’s initial 25% tariff threat and imposition of a 10% duty on all Chinese imports, he has heaped on more tariff actions that could muddy the waters on border negotiations. These include substantially raising tariffs on steel and aluminum to a flat 25%, rescinding longstanding exemptions for Canada and Mexico, the largest sources of U.S. imports of the metals. These steep increases, which also extend to hundreds of downstream steel products, are due to take effect a week after the border tariffs, on March 12.
Tariff Threats Multiply
Trump has also said he wants to impose 25% tariffs on imports of autos, pharmaceuticals, and semiconductors, in addition to ordering "reciprocal" tariffs to match the duty rates and trade barriers of other countries. The threat of these tariffs could kick off an early launch of a renegotiation of the U.S.-Mexico-Canada agreement on trade that is due by 2026, Ujczo added.
Progress Cited
Mexican Economy Minister Marcelo Ebrard said on Thursday that he had a "constructive dialogue" during a meeting with Trump’s top trade officials, including Commerce Secretary Howard Lutnick, White House economic adviser Kevin Hassett, and U.S. Trade Representative nominee Jamieson Greer. Ebrard said in a post on X that the "joint work" on U.S. trade matters starts on Monday.
Mexico and Canada Take Action
Mexico has begun deploying as many as 10,000 national guard troops to its northern border, as part of the agreement that Mexican President Claudia Sheinbaum said also called on the U.S. to work to stop the flow of firearms into Mexico. Canada earlier this month created a new fentanyl czar to coordinate the fight against smuggling of the deadly opioid, appointing senior intelligence official Kevin Brosseau to the post. Ottawa also has reclassified drug cartels as terrorist entities and has deployed drones, helicopters, and other surveillance technologies on the vast northern U.S. border.
Small Package Hurdle
White House officials say Canada, Mexico, and China are conduits for shipments of fentanyl and its precursor chemicals into the U.S. in small packages that are not often inspected. A major hurdle to slowing these shipments is a pause in Trump’s abrupt order to suspend the duty-free "de minimis" exemption for packages valued at under $800 from the three countries because no procedures were in place to screen the millions of low-value express packages arriving at U.S. airports daily. It’s unclear when the U.S. Customs and Border Protection agency will be able to close the de minimis loophole again.
Conclusion
The negotiations between Canada, Mexico, and the U.S. will be crucial in determining the fate of the tariffs. While progress is being made on the security front, it remains to be seen whether it will be enough to avoid the tariffs. The situation highlights the complexities of global trade and the challenges of balancing national security concerns with economic interests.
FAQs
- What is the purpose of the tariffs?
The tariffs are intended to address national security concerns and curb fentanyl trafficking. - What are the potential consequences of the tariffs?
The tariffs could have a significant impact on the global economy, particularly for Canada and Mexico, which are major trading partners of the U.S. - How will the negotiations proceed?
The negotiations will involve Canada, Mexico, and the U.S. discussing the progress made on border security and fentanyl trafficking, as well as the potential tariffs. - What is the deadline for the tariffs to take effect?
The tariffs are set to take effect on March 4, 2023.