The Trump regime is once again vaguely threatening to unilaterally withdraw from the North American Free Trade Agreement (NAFTA) and they've brought a new weapon to the table that is itself a violation of NAFTA.
Although it hasn't been officially implemented yet, Trump's tariffs on steel and aluminum imports is not expected to have any exceptions, meaning it will include imports from our closest trading partners Canada and Mexico.
And the tariffs will not be lifted, U.S. Trade Representative Robert Lighthizer says, unless they agree to his ridiculous demands.
Early on Monday, the U.S. president ratcheted up tension before the ministerial meetings in Mexico by tweeting that “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”
Lighthizer said that meant Canada and Mexico would enjoy tariff exemptions once a NAFTA deal was reached, calling the tariffs an “incentive” to conclude the talks.
Canada and Mexico say they should be exempted from such moves, and have warned they could retaliate.
This is actually far more reckless that it looks at face value.
Over the past several days, Trump has repeatedly claimed that we have a massive trade deficit with Canada, but that is simply not true. Not only do we have an overall trade surplus with Canada, Canada is also the number one destination for exports of American-made steel. Canada imports American steel because, under NAFTA, it's free. Furthermore, American-made steel, albeit a lesser amount, is used to manufacture cars and other products in Mexico that are then imported back into the United States.
And here's another ironic fact: the higher content thresholds for North American-made cars and trucks that Lighthizer is asking for are also expected to cost jobs in manufacturing as carmakers import more finished products assembled overseas rather than pay higher prices for a more limited supply of North American-made auto parts made using -- you guessed it -- American steel.
Beyond the metal market, we import many other things from Canada and Mexico they could use to retaliate. We import Canadian syrup and dairy products. We import Mexican fruits and produce from avocados to wheat and bananas. We import their products, and they import ours, because doing so is free. Or at least it is for now.
For the sake of perspective, I just want to point out that China produces nearly 50 percent of the entire world's supply of steel while America produces only 5 percent and Canada doesn't even rank in the top 10, and yet Trump's tariffs will hit Canada harder than China.
It's okay that China produces a lot of steel, by the way, because their economy usually grows at a rate of 6 to 7 percent or more and it takes a whole lot of steel to build homes and transportation for 1.4 billion people.