What's going on?
The United States reached a deal on Friday with Canada and Mexico to lift tariffs on steel and aluminum imports in a big step forward for North American trade.
What does this mean?
The US introduced the tariffs a year ago on “national security” grounds, charging a 25% levy on steel and a 10% tax on aluminum entering the country. Not only have these now been removed, but the US dropped demands for quotas on the amount of metal traded between the three. Nevertheless, Canadian and Mexican metal imports from elsewhere will supposedly be monitored – with ongoing US trade nemesis China the elephant in the room.
Removing the tariffs is seen as an important step towards formal adoption of the US-Mexico-Canada trade deal signed in October, replacing the previous North American Free Trade Agreement. And while European Union steel and aluminum exports to the US remain subject to tariffs, the White House on Wednesday postponed a decision on whether to impose fresh taxes on auto imports to allow more time for talks with the EU and Japan. The US may have enough trade war on its plate as it is…
Why should I care?
The bigger picture: Following rising trade tensions, some light relief.
The trade war with China cranked up another notch on Wednesday, after the US blacklisted telecoms giant Huawei (Google followed suit on Sunday). Spooked investors who had previously been piling into “safe-haven” European government bonds seemed relieved, however, that things were quieting down on the Western front. That may also strengthen the US’s hand in negotiations with China.
For you personally: More metal in your pocket.
Retaliatory Canadian and Mexican tariffs had been targeting US farm goods as well as products like ketchup. With those taxes removed as of Sunday, life may now get a little less expensive for all North American consumers. In the US, that could push up already-buoyant consumer sentiment even further: Americans are currently feeling the most positive about their economy they have been in 15 years.