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Politics Trudeau will play the latest twists in the U.S. tariff tale

For seven months, it seemed like the problem with U.S. tariffs on steel and aluminum was frozen, with nothing really happening. Then suddenly there was a flurry: Prime Minister Justin Trudeau called U.S. President Donald Trump twice, then Vice-President Mike Pence. Foreign Affairs Minister Chrystia Freeland booked a trip to Washington.

Things actually had started moving earlier. About three weeks ago, with a key political window closing, Mexican President Andres Manuel Lopez Obrador instructed his chief North American trade negotiator, Jesus Seade, to start a new push to get Washington to lift the tariffs. Mr. Seade held three meetings in two weeks with U.S. Trade Representative Robert Lighthizer.

And it turned out the United States, now directly engaged in a bigger trade war with China, was willing to make a steel deal.

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For months, Canada and Mexico had rejected the Trump administration’s key condition for dropping 10-per-cent tariffs on their steel and aluminum: quotas that would cap their exports to the United States.

Now the United States appears willing to drop that quota demand. Mr. Seade told The Globe and Mail that Mexico is “very close” to a deal to lift the tariffs, which includes no quotas.

What’s more, the Mexicans paused their talks with Washington to give the Canadian government an opportunity to strike a similar deal.

You’d think that Mr. Trudeau’s Liberal government would be rushing to accept this Mexican gift with smiles, and carry it into the election campaign that starts in four months. A deal would clear away the biggest weakness leftover from last year’s North American free-trade agreement (NAFTA) talks – that the Liberals made a deal though steel tariffs were still in place. Sure, it was the Mexicans who were the ones who loosened the lid on the ketchup, but the Liberals could still spread it liberally for political gain. It would be a win.

But on Wednesday, Ms. Freeland emerged from talks with Mr. Lighthizer saying little. The Canadian team was still cautiously clarifying details.

The big point is that Mr. Seade insisted the deal has no quotas. Instead, it will establish a monitoring system to prevent efforts by other countries to ship steel and aluminum to the United States through Mexico, and commits Mexico to respond to third-country efforts to dump steel.

And the Mexicans held off on completing the deal to give Canada an opening to make its own.

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On some levels that sounds like the late stages of last year’s NAFTA talks, when the Mexicans conducted separate bilateral talks with the United States that wrapped up many of the issues, leaving Canada to scramble into the negotiations at the end.

Mr. Seade said he didn’t want that dynamic to be repeated. And he said that this is a different kind of negotiation. NAFTA was a trilateral agreement, but the U.S. steel tariffs are measures imposed on each country by Washington.

“This is not trilateral. This is the U.S. banging you on the head with one pan. Maybe it’s the same pan, but separately,” he said. But he said there is still advantage in having it end with some kind of trilateral “wrap-up” – or at least with no country feeling left out of the loop.

There’s another reason that Mexican officials want to see Canada wrap up its steel-tariff deal: The tariff issue stands in the way of ratifying the successor to NAFTA, the United States-Mexico-Canada Agreement.

Both Canada and Mexico had insisted they would not ratify the agreement until the United States had lifted the steel tariffs. And if Canada doesn’t ratify the agreement soon, before Parliament rises for a summer break followed by the October election, then it won’t be ratified in 2019.

Even now, ratification will not be easy. Democrats in the U.S. House of Representatives have blocked it so far. But Mr. Seade still hopes that can change. He said if there is a clear signal the lower house of the U.S. Congress will pass the deal, then Mr. Trudeau’s government might proceed with ratification here.

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That’s still a lot of ifs. But Mr. Trudeau’s government is now close to what it really wants – a deal to lift those tariffs. That would bring a sigh of relief from the industries and nervous workers. It would allow him to claim that he beat back Trump administration tariffs to protect jobs. It’s a gift from Mexico he can take into an election campaign.

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