Mnuchin says Canada, Mexico would avoid tariffs if NAFTA gets done

Treasury Secretary Steven Mnuchin said Tuesday that a tariff exemption for Mexico and Canada will depend on whether the North American Free Trade Agreement (NAFTA) can be successfully updated.

Mnuchin’s remarks on Capitol Hill suggest that President Trump won’t agree to exempt two of the United States’s largest trading partners from sweeping steel and aluminum tariffs without an upgrade of the 24-year-old North American trade pact.

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“In the case of Canada and Mexico, our objective is to have a new NAFTA and once we do that, which I’m cautiously optimistic on, the tariffs won’t apply to them,” Mnuchin told lawmakers at the House Appropriations Committee Subcommittee on Financial Services and General Government.

The Treasury secretary, who said he is fully supportive of the president’s move to impose tariffs on steel and aluminum over national security concerns, said he would not get into specifics of the tariffs plan he expects Trump to announce later in the week.

“What I can confirm, and he’s mentioned this, to the extent that we reach our objective in renegotiating NAFTA, which is the priority, that Canada and Mexico will be exempt from those tariffs,” he told the House panel. 

Trump suggested in a series of tweets that the steel tariffs could be used as leverage to speed up the completion of a new NAFTA deal. Negotiators wrapped up the seventh round of talks on Monday without a resolution. 

Rep. David Young (R-Iowa) expressed concerns to Mnunchin that the tariff policy would hurt farmers in his state.

“There’s a fear out there that any kind of a potential trade war retaliation could really blunt the positive effects with the economy from the Tax Cuts and Jobs Act,” Young said.

Mnuchin said he is well aware of the fears about a trade war.

“I think when people see this — again, I want to be clear that the president does want to make sure we protect the steel and aluminum industry,” he said.

“He does understand the potential impacts it has on the economy. I think we have a way of managing through this.”

Mnuchin told Young that he and Agriculture Secretary Sonny Perdue have “had significant input into these discussions.”

“I can assure you that Director [Gary] Cohn and myself have received lots of feedback on all these issues and we’re balancing various issues,” Mnuchin said, referring to the head of the National Economic Council who has opposed moving to impose the steep tariffs.

U.S. allies such as Canada have already said they would retaliate against the tariffs to protect their workers and steel and aluminum industries.

Chrystia Freeland, Canada’s minister of foreign affairs, doubled down on her nation’s promise to take “appropriate, responsive measures.”

“As the No. 1 customer of American steel, Canada would view any trade restrictions on American steel and aluminum as absolutely unacceptable,” she told reporters at the conclusion of the NAFTA talks on Monday.

“Should restrictions be imposed on Canadian steel and aluminum products Canada will take appropriate responsive measures to defend our trade interests and our workers,” she said.