Why Did Donald Trump Lift Steel and Aluminum Tariffs on Canada and Mexico?

Donald Trump's decision to lift steel and aluminum tariffs on Canada and Mexico is a complex political move that reflects his broader trade policies and the changing dynamics in international trade negotiations.

Political Considerations

Trump lifted the steel and aluminum tariffs on Canada and Mexico as part of a broader trade agreement, known as the United States-Mexico-Canada Agreement (USMCA). This move was driven by both political and economic considerations. Key lawmakers had warned the president that without lifting these tariffs, there would be no hope of ratifying a new deal with our two biggest trading partners, Canada and Mexico, this year. This warning was crucial, as not ratifying the deal would have been unacceptable to the president.

A Behind-the-Scenes Look at Trade Negotiations

Under normal circumstances, governments negotiate trade agreements in a generally convivial atmosphere. However, under Donald Trump, negotiations have been anything but smooth. The president's approach to trade has often been more about leveraging tariffs as a negotiating tool rather than fostering a collaborative environment. This approach did not always yield desired results. In the case of the USMCA, Canada, in particular, held out for changes that Trump was initially opposed to, such as smaller companies being covered by the agreement. This resistance led to a shift in the negotiating dynamics, with the ball now in the hands of Canada and Mexico, which would not ratify the deal in their parliaments until the tariffs were lifted. Thus, Trump had no choice but to remove the tariffs to move forward with the trade deal.

Bordering on Manipulation

Donald Trump's method of conducting trade negotiations is often accused of being manipulative. He imposes tariffs on trading partners to put pressure on them during negotiations. However, this approach can backfire, as seen in the case of the USMCA. The tariffs did not achieve the desired results, and Canada, in particular, held out for more favorable terms. Ultimately, Trump had to concede and lift the tariffs to finalize the agreement. In the end, while the changes in NAFTA 2 are modest, they are enough to appease his base, giving him something to spin as a victory, even if it is not entirely so.

Implications for Future Trade Agreements

The decision to lift the steel and aluminum tariffs on Canada and Mexico raises questions about the future of trade negotiations under the Trump administration. It highlights the importance of political considerations and the need for compromise in international trade agreements. The outcome of the USMCA demonstrates that tariffs may not always be an effective negotiating tool and that meaningful concessions can lead to better trade deals.

Conclusion

Donald Trump's decision to lift the steel and aluminum tariffs on Canada and Mexico is a reflection of both his political strategy and the changing dynamics in international trade negotiations. While he initially imposed tariffs to leverage talks, he had to lift them to finalize the USMCA. This move underscores the complexity of trade negotiations and the importance of political considerations in achieving successful trade agreements.