Kudlow Says He's Working to End Tariffs as Canada Balks

(Bloomberg) -- White House economic adviser Larry Kudlow said he's working to remove U.S. tariffs on steel and aluminum imports from Canada and Mexico, after a Canadian minister signaled that his government may not ratify a new North American trade agreement if the duties remain.

Kudlow made the comments on a panel at the National Governors Association's winter meeting in Washington on Sunday. He spoke after Marc Garneau, Canada's transport minister, said “I don't know if we are going to get there” in approving the deal if the tariffs aren't removed.

The duties are no longer needed now that the two countries and Mexico have agreed on the new U.S.-Mexico-Canada Agreement, or USMCA, Garneau said. Kudlow also suggested that U.S. Trade Representative Robert Lighthizer was working toward having the tariffs removed.

“Ambassador Lighthizer and his group, we are working on that, we are hard at work on that, to solve that issue,” Kudlow said of the metals tariffs after Garneau spoke. Earlier in the panel discussion, Kudlow said the new three-nation agreement was “very strong” and that Trump taught him tariffs can be a good negotiating tactic to break down trade barriers.

Canada retaliated dollar-for-dollar against U.S. tariffs last year, and Garneau's comments on Sunday were some of the sharpest about the dispute since then as Prime Minister Justin Trudeau leads his government toward an October election. Garneau said that while political energy may shift to other issues in coming months, the tariffs alone are a major stumbling block to ratification.

‘Unnecessary Tax'

“Those tariffs are an unnecessary tax which is weighing down on both countries,” said Garneau, a former astronaut who served on U.S.-led space missions. He also said the original U.S. justification for tariffs on national security grounds was never justified.

“This will present us with real challenges as we begin the process of ratification in Canada -- I don't know if we are going to get there,” Garneau said.

Canada would quickly drop its metals tariffs and ratify the agreement in response to a U.S. move, Garneau said. “We want to go ahead and do it because this is very good for both of our countries,” Garneau said of ratifying the trade agreement.

Garneau appealed to the governors in the audience to push the Trump administration to drop the tariffs, noting that Canada is the top export market for many U.S. states. The U.S. also has a $2 billion surplus in steel trade with Canada, and the bilateral deficit on aluminum is because America needs more of that metal than it can produce, Garneau said.

Letter to Ross

Mexican officials have also called for the metal tariffs to be removed, and a coalition of business, agricultural and trade groups, including the U.S. Chamber of Commerce wrote a letter in January asking the same of Lighthizer and Commerce Secretary Wilbur Ross.

Kudlow touted the new trade agreement on Sunday before Garneau spoke, saying it was a “template” for other pacts and would bring $62 billion of auto investment to the U.S. Such agreements are better than broad, multilateral trade pacts that sink to the “lowest common denominator,” Kudlow said.

Passing the USMCA would also be helpful as a “show of unity” by North America against other trade competitors like China, he said.

(A previous version of this story corrected an attribution in the third paragraph.)

--With assistance from Mark Niquette and Jenny Leonard.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Mark Niquette, Ros Krasny

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