Trump’s steel shock drives wedge into sluggish NAFTA talks

U.S. President Donald Trump said he would impose the tariffs beginning next week, raising the risk of exacerbating tensions at negotiations already facing serious challenges.

Officials were unable to say immediately whether the tariffs would include imports from Canada and Mexico, the other two partners in the 24-year-old North American Free Trade Agreement.

The lack of clarity created uncertainty as some countries might be exempt or taxed at a lower rate, analysts said. Automakers and other users of the metals are also worried about retaliatory tariffs that might affect their finished products.
For months, the United States, Canada and Mexico have been mired in disagreement over a U.S. demand to require a greater portion of North American auto parts and components under NAFTA, which Trump has threatened to ditch if it is not recast to his liking.

Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, said Trump’s call for a 25 percent tariff on imported steel appeared intended to increase U.S. content in industrial goods but would have unintended consequences.

“Who is the priority here? Workers? Consumers? Somebody will end up paying for this,” Kalach told on the sidelines of the latest NAFTA talks in Mexico City. “What’s going to happen to the competitiveness of North America?”

Canada is the largest exporter of steel by far to the United States, and Trump’s proposed tariff would raise the cost of building vehicles, experts said.

“This would be very bad news for the auto industry,” said one person close to the negotiations.

Canada’s chief negotiator, Steve Verheul, said his team was “keeping an eye on what’s going on outside” when asked how the talks were progressing late on Thursday.

“It’s a bit of a distraction,” he added, without elaborating.

Although it differs by company, for their vehicles made in North America, Fiat Chrysler (FCHA.MI), Ford Motor Co (F.N) and General Motors Co (GM.N) source the vast majority of their steel from North America, according to the auto industry.