Trade peace in North America could strengthen Trump's hand in China negotiations

Trade peace in North America could strengthen Trump's hand in China negotiations
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Will trade talks move to trade war between the U.S. and China? That’s the story dominating headlines as details emerge on a new round of tariffs and counter-tariffs levied by the U.S. and China. Meanwhile, out of the limelight, comes word that the U.S., Canada and Mexico may be nearing agreement on a deal that would result in the lifting of U.S. tariffs on steel and aluminum coming from Canada and Mexico — and open a path to the passage of the USMCA (U.S.-Mexico-Canada) trade agreement. 

Those tariffs, in place for almost a year, have been a dead weight on the ratification of the USMCA trade deal, meant to replace NAFTA. The aluminum tariff, in particular, stood at cross-purposes with the fact that Canada is legally recognized as part of the U.S. defense industrial base — and that aluminum production has been a collaborative U.S.-Canada effort even before World War II.

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Whatever the reason for their initial imposition, it’s time for President TrumpDonald John TrumpJimmy Carter: 'I hope there's an age limit' on presidency White House fires DHS general counsel: report Trump to cap California trip with visit to the border MORE to lift the tariffs, declare victory and rally the U.S.’s North American trade partners to the president’s side as he holds the line on China.

The time to end the steel and aluminum tariffs is now, if all three countries are to ratify USMCA before politics intervene and threaten to push the issue past the U.S. 2020 presidential election.

A new deal that lifted the tariffs would provide an additional benefit as well: It would clear the way for the U.S., Canada, and Mexico to work together to encourage the development of critical minerals — that rapidly-changing group of metals and minerals essential to advanced technology, including everything from laptops and LEDs, wind and solar power, EV batteries and energy storage, to smart phones and smart bombs.

With the U.S. dependent on China as its primary supplier of 22 of the 35 critical minerals the Trump administration has deemed “essential to the national economy and national security,” new sources of North American supply could strengthen the president’s hand in the China trade talks — and deprive China of the leverage it has to limit or even cut off U.S. critical mineral supplies. 

The potential to super-charge a North American resource renaissance is real. Mexico, though thought of more as an oil producing nation, has a long history mining silver, copper and gold — which today means Mexico might also have economic concentrations of critical co-product metals ranging from arsenic to zirconium.

Both the U.S. and Canada are among the world’s most resource-rich countries. A new focus on critical minerals could energize new methods of mining, refining, reclamation and recycling that could bring new supply online to meet surging metals demand. Developing new regional sources of the raw materials needed for advanced manufacturing is fully consistent with the USMCA trade pact.

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So, while the headlines are dominated by U.S.-China trade war, watch for news on the North American trade front. If the president acts now to lift U.S. tariffs on steel and aluminum, opening the path to the passage of the USMCA — linking three nations with a combined GDP of $25 trillion –— trade friction will give way to a new era of trade expansion and economic growth. Trade peace in North America may be just the signal the president wants to send as trade war looms with China.

Daniel McGroarty is head of the American Resource Policy Network, a non-partisan association of resource development experts. McGroarty has testified on critical mineral issues in both the U.S. House and Senate.