On May 17, the United States announced an agreement with Canada and Mexico to remove the Section 232 tariffs on Canadian and Mexican steel and aluminum imports and to remove all retaliatory tariffs imposed on American goods by those nations. In accordance with the agreement, all tariffs on these goods must be eliminated within two days.

As part of the agreement, the U.S. will terminate its World Trade Organization (WTO) litigation claim regarding Section 232 tariffs against Canada and Mexico, and in turn, Canada and Mexico will terminate their respective WTO claims against the U.S.

The U.S. imposed Section 232 tariffs on Mexican and Canadian steel and aluminum products in early 2018 to encourage American companies to use domestic metals in manufacturing as opposed to seeking out cheaper materials to import. The May 17 agreement allows for aggressive monitoring and a mechanism to prevent surges in imports of steel and aluminum. If surges in imports of specific steel and aluminum products occur, the United States may re-impose Section 232 tariffs on those products.

In order to qualify for re-imposed retaliatory tariffs, the trading value of imports of steel or aluminum products must be found to have surged “meaningfully beyond historic volumes of trade over a period of time,” according to the agreement. Additionally, in the future, retaliatory duties may only be imposed after the countries have held consultations on the matter, and only may retaliate against goods “in the affected sector.” In other words, Canada relinquishes the right to levy additional taxes against “other goods” besides steel and aluminum. Canada previously employed this tactic by taxing American goods like cosmetics and food products in retaliation.

The imposition of Section 232 tariffs hindered trade and diplomatic relations between the member nations, but with the tariffs lifted, the future is looking brighter for the passage of the U.S.-Mexico-Canada Agreement (USCMA). Given that the Canadian and Mexican economies are closely tied to U.S. markets, there is a strong incentive for both nations to have a free trade agreement with the U.S. and they are likely to ratify the USMCA without further delays.

To learn more about the elimination of Section 232 tariffs and its effect on the passage of USMCA, please read the U.S., Canada, or Mexico joint statement, or visit the Atlantic Council’s coverage of the matter.