SMA: North American steel trade needs a strategic reset

Editor’s note

This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at smu@crugroup.com.

It may come as a surprise to some, but I sometimes see eye to eye with my steel industry colleagues from Canada and Mexico.

We agree that the United States–Mexico–Canada Agreement (USMCA) has been beneficial to all three countries of one of the world’s most important trading partnerships. We also agree that the mandatory review of the USMCA, which is set to begin next month, gives us an opportunity to talk about how to modernize and improve the landmark agreement.

But my Canadian and Mexican counterparts are wrong when they assert that the US national security tariff on imported steel, better known as the Section 232 tariff, should be on the table during any review and renegotiation of the USMCA.

The USMCA and the Section 232 tariff are the two key trade achievements of the Trump administration. The first can and should be improved; the second is fundamental to US policy on steel trade and should remain untouched. They were implemented separately and not intended to be a “package deal.”

The review of the USMCA is an opportunity to redefine, realign and rebalance the steel trading relationships in the region. The United States accounts for 85% of the gross domestic product (GDP) of North America, a fact that leads to several questions: (1) Why should the United States have such huge trade deficits with Canada and Mexico? (2) Why is there not more American-made steel content in North American made automobiles? (3) Why are there not more American steelmaking and manufacturing jobs? This is why the 232 tariffs remain in place.

The Section 232 tariff on imported steel allows the United States to negotiate from a position of strength befitting America’s economic and manufacturing might. The president wants more steelmaking jobs in the United States, more US-made content in cars being produced in North America, and more domestic steel production.

In other words, the Trump administration wants to send a message that selling steel to the United States is a not a right but a privilege. Canada’s ambassador to the United States, Mark Wiseman, seems to agree. Last week, during the question-and-answer session with Bank of Montreal Chief Executive Darryl White at a meeting of Canadian business executives, he was quoted by the Wall Street Journal as saying, “We, as Canadians, are privileged to be next door to the world’s most dynamic economy.” Wiseman went on to say, “We should not seek to trade that for anything.”