President Donald Trump lifted steel and aluminum tariffs on Arizona’s two largest trading partners – Mexico and Canada – renewing hopes that the nation’s 25-year-old free trade relationship between the three countries can survive.
Now, all eyes are on the U.S. Congress to seal the deal. A modern new free trade agreement, the United States Mexico Canada Agreement (USMCA), adds new chapters on digital trade and intellectual property. It also offers benefits like more duty-free access to Canadian dairy products and lower custom duties on many goods.
President Trump made the announcement Friday at a National Association of Realtors Legislative Meetings and Trade Expo in Washington, D.C.
He called on Congress to ratify the agreement, saying it will “make our economy even more successful than it already is – if that’s possible. Which, it is possible.”
There are reports that action could be taken any day now in Congress.
Consumers and businesses get price relief
The announcement is great news for consumers and businesses, who are paying the cost in higher prices after more than a year of trade wars with America’s largest trading partners, China, Mexico and Canada. Last year, the U.S. imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum on Canada and Mexico. They responded with tariffs of their own on an assortment of U.S. goods including agricultural products from Arizona.
On Friday, dozens of elected officials and industry advocacy groups cheered the news, issuing statements on national networks and the White House website.
“America’s struggling dairy farmers are in need of some good news, and today’s announcement certainly helps. This paves the way for Mexico to drop retaliatory tariffs that have harmed dairy, and for Congress to take its next step to help our producers – to vote on USMCA and quickly ratify it,” National Milk Producers Federation President and CEO Jim Mulhern said.
National Association of Manufacturers President and CEO Jay Timmons said manufacturers are at the ready to help Congress speed the USMCA forward.
“We are now one step closer to a North American trade deal that opens markets, raises standards, provides enforcement and modernizes trade rules so that manufacturers across the United States can grow our economy. Manufacturers look forward to working with Congress and the Administration to get this over the finish line,” Timmons said.
More “good” news on auto tariffs
In another announcement last week, Trump said he will hold off another six months in imposing broad new 25 percent auto tariffs on other trading partners including Japan and the European Union.
If he follows through on imposing tariffs, that could hit car buyers hard. New and imported vehicle prices in the U.S. could increase from $4,400 to $6,875, according to a report from the Center for Automotive Research.
Talks are still in the early stages so time will tell the outcome. But the White House faces strong opposition from industry and elected officials on the proposed trade taxes.
Stage now set for Congress to act on USMCA
With the metal tariffs lifted in North America, the stage is set for all three countries to finally ratify the modernized version of NAFTA, the North Arizona Free Trade Agreement that dates back to 1994.
The new USMCA has new chapters and provisions to move free trade into the modern age including digital trade rules and protection of intellectual property.
In Arizona, the economy has expanded immensely under NAFTA and is poised to do even better under a new modernized version, according to research commissioned by the non-profit Arizona Chamber Foundation, the Arizona Chamber of Commerce and Industry, and Arizona-Mexico Commission.
“The latest trade figures tell the story of a state with an economy that is deeply integrated across international borders,” Arizona Chamber Foundation CEO Emily Anne Gullickson said. “The adoption of the USMCA will build on Arizona’s already-outstanding environment for business and will attract more investment in our state, creating new jobs and prosperity.”
Between 2015-2017 alone, Mexico and Canada purchased $10.5 billion in Arizona exports, which is twice the combined value of the state’s next eight-highest export markets.
Canada and Mexico agree to lift retaliatory tariffs
In response to Trump’s announcement, Canada and Mexico removed retaliatory tariffs they had slapped on more than $15 billion in U.S. exports, including agricultural products important to Arizona and other states.
In addition, both countries have agreed to:
- Drop pending litigation related to the tariffs
- Set up measures to prevent the importation of aluminum or steel made outside of the U.S. or that is “unfairly subsidized and/or sold at dumped prices.”
- Create a process to monitor aluminum and steel trade between countries
Mexico also enacted sweeping labor reform changes last month to appease Democrats in Congress, who want assurance the measures would be enforced.
Partisan politics could be only stumbling block
Now, all three countries’ top lawmaking bodies must ratify the deal. Canada and Mexico indicated they are ready to move. Everyone is waiting on the U.S. Congress.
Partisan politics may be the only thing standing in the way.
Republicans broadly support the deal as is. Democratic leaders still have a few sticking points.
But after Trump’s announcement, Democrats quickly opened talks to discuss their next move, Washington news outlets reported. Areas of contention continue to be labor, environment and pharmaceuticals.
Those same news reports said that U.S. Trade Representative Robert Lighthizer is optimistic that Democratic leader Nancy Pelosi is focused on passage.
In Arizona, many congressional leaders are pushing for the pact to be approved including Sen. Martha McSally.
“We [have] got to get that across the finish line as soon as possible,” McSally told Chamber Business News (CBN). “The importance of this to our economy here in Arizona, as you know, it’s over 200,000 jobs. We need politics to stop being played with this…this isn’t about President Trump; this is about the American people. This is about the people we represent.”
Industry calling on Congress to save the free (trade) world
Dozens of industry groups calling for ratification of the new USMCA include:
- Alliance for American Manufacturing
- Aluminum Association
- American Dairy Coalition
- American Seed Trade Association
- Associated Equipment Distributors
- Business Roundtable
- Corn Refiners Association
- Distilled Spirits Council President
- The Ford Motor Company
- General Motors
- International Dairy Foods Association
- Motor Equipment Manufacturers Association
- National Association of Manufacturers
- National Association of Wheat Growers
- National Cattlemen’s Beef Association
- National Grain and Feed Association
- National Milk Producers Federation
- Steel Manufacturers Association
- United States Apple Association
- United States Chamber of Commerce
- United States Grains Council
- United States Meat Export Federation