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UPDATE ON NAFTA TALKS – Trump uses steel and aluminum tariffs as NAFTA bargaining chip; new energy chapter announced

The 7th round of NAFTA talks concluded in Mexico City yesterday with US president Donald Trump threatening steel and aluminum tariffs to gain concessions in the deal plus news of Canada, the United States and Mexico agreeing to an expansion of the climate-killing energy proportionality provision in the deal.

The Washington Post reports, “Trump on Thursday [March 1] surprised much of Washington by announcing that he would impose a 25 percent tariff on steel and a 10 percent tariff on aluminum. A formal announcement is expected this week or next.”

The Toronto Star has reported, “Ken Neumann, the director of the Canada’s United Steelworkers, said a tariff on Canada could ‘decimate’ the Canadian industry.” As the Washington Post explains, “Canada is the top exporter to U.S. markets of both steel and aluminum. Canada is also the biggest importer of U.S. steel and aluminum.”

Now comes the news that the tariffs are a bargaining chip in the NAFTA talks. The Toronto Star reports, “Trump said Monday [March 5] that Canada and Mexico would be exempted from his threatened tariffs if and when they accepted a ‘fair’ new version of the continental free trade pact. Trump repeated his tweeted statement at an afternoon White House appearance, saying, ‘If they aren’t going to make a fair NAFTA deal, we’re just going to leave it this way.'”

Bloomberg notes, “Prime Minister Justin Trudeau was said to have discussed the tariff issue with Trump during a phone call Monday evening, according to a Canadian government official, speaking on condition of anonymity. Trudeau told Trump the potential tariffs on Canada are an impediment to a deal on NAFTA.”

That would be an understatement.

Furthermore, the Canadian Press reports, “[U.S. trade czar Robert Lighthizer] expressed frustration that only six chapters have been completed so far — with three more at this round. There are potentially up to 30 to conclude, including a newly announced energy chapter designed to lock in Mexico’s privatization reforms.”

On that front, Politico notes, “NAFTA 2.0 will include a standalone chapter on energy, an addition that took Mexico and Canada a few rounds to get the U.S. to support, a source close to the negotiations confirmed. Over the last few rounds, there had been speculation over whether there would be a full energy chapter or whether energy-related issues would be addressed in other chapters. Both options will be realized.”

The article adds, “The standalone chapter will focus on regional cooperation and integration, looking for ‘more interconnectivity across the networks of energy in North America’, the source said. However, hard obligations on energy can go in other chapters such as state-owned enterprise, government procurement and investment. Adding a standalone chapter on energy will help codify into a multinational agreement significant changes that Mexico has made to allow foreign direct investment in its energy sector, Rep. Will Hurd told Morning Trade in Mexico City.”

The Council of Canadians is calling for a better NAFTA, one that replaces the current deal with an agreement that ends the controversial investor-state dispute settlement mechanism that has been repeatedly used to undermine environmental protections, removes energy proportionality (rather than expanding it) and commits to a 100 per cent clean energy economy by 2050, removes water as a service, investment and a good and instead recognizes it as a human right along with the United Nations obligations to “respect, protect and fulfill” that right, and that enshrines the United Nations Declaration on the Rights of Indigenous Peoples and the right to free, prior and informed consent.

There is an urgency to this. Lighthizer has suggested that an agreement in principle could be reached by early-April to avoid the political turmoil and delays related to the upcoming Mexican and US midterm elections.

The 8th round of NAFTA talks have not yet been confirmed, but they are expected to take place in Washington, DC in early April.