US and Canada in Talks to Avoid 25% Tariffs on Exports
Mexico has begun deploying up to 10,000 national guard troops to its northern border as part of an agreement with the US to stop the flow of firearms into Mexico. (EPA Images pic)
Canada and Mexico are expected to intensify efforts this week to avoid punishing 25% tariffs on their exports to the US 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.
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 specialising in US-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 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 "But it’s overly optimistic to think that those tariffs would be fully rescinded."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 aluminium to a flat 25%, rescinding longstanding exemptions for Canada and Mexico, the largest sources of US 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.
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 US Trade Representative nominee Jamieson Greer. Ebrard said in a post on X that the "joint work" on US trade matters starts today.
Small Package Hurdle
White House officials say Canada, Mexico, and China are conduits for shipments of fentanyl and its precursor chemicals into the US 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 US$800 from the three countries because no procedures were in place to screen the millions of low-value express packages arriving at US airports daily.
Conclusion
The US and Canada are in talks to avoid 25% tariffs on their exports to the US, but the negotiations are set to face more challenges ahead. The Trump administration has threatened to impose tariffs on a range of products, including autos, pharmaceuticals, and semiconductors, and has also raised tariffs on steel and aluminium. The two countries will need to make significant progress on border security and fentanyl trafficking to avoid the tariffs.
FAQs
Q: What is the deadline for the tariff suspension?
A: The deadline is March 4.
Q: What are the countries doing to strengthen border security?
A: Mexico has begun deploying up to 10,000 national guard troops to its northern border, while Canada has reclassified drug cartels as terrorist entities and deployed drones, helicopters, and other surveillance technologies on the vast northern US border.
Q: What is the status of the USMCA trade agreement?
A: The USMCA is due to be renegotiated by 2026, but the threat of tariffs could kick off an early launch of the renegotiation process.