Last week President Trump signed stiff tariffs on imported steel and aluminum, a move that was not only widely opposed by economists, but also from politicians in his own party who fear that the move could set off a trade war with key allies.

The levies on imports of steel and aluminum will rise by 25 and 10 percent, respectively, with business groups warning that the effect could be felt across the international supply network, and could increase prices for consumers across a number of areas including automobiles, appliances, and other goods.

After various back and forth lobbying rounds, President Trump agreed to temporarily exempt close North American allies including Canada and Mexico. And considering the Trump administration’s ongoing talks of renegotiating the North American Free Trade Agreement (or NAFTA), this latest tariff move takes on a whole new significance when considering the U.S.’s relationship with our North American allies.

While President Trump has repeatedly said that these new tariffs are directly linked with his administration’s shifting views on NAFTA, officials from both Canada and Mexico deny the link between these new tariffs and NAFTA, with Canadian Prime Minister Justin Trudeau saying “We don’t link together the tariffs and the negotiations for NAFTA, but we’re happy to continue to move forward on the negotiations.”

Canada’s foreign minister even went as far as saying that the temporary exemption would not change the country’s approach to NAFTA, while Mexico said that these talks would not be subject to conditions outside of the negotiating process. With President Trump himself referring to these exemptions as being a future bargaining chip in NAFTA renegotiation talks, it is clear that these tariffs take on a whole new meaning in the context of free trade in North America.

Canada is one of the largest exporters of aluminum, and considering that American automotive supply chains heavily rely on raw aluminum from Canada, it’s not hard to see how tariffs of this nature could affect trade between North American countries.

The U.S. is the largest steel importer in the world and this order could potentially affect our trade relationships with South Korea, China, Japan, Germany, Turkey, and Brazil.We are closely monitoring all NAFTA related news, as well as the ongoing effect these tariffs could have on international trade. We’ll be sure to update you with any breaking news on the subject.

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