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Yes, this letter was sent at the end of the last Congress, the 115th, and we now have a new one, the 116th, with a new speaker, Nancy Pelosi, and a new chairman of the House Committee on Ways and Means, Congressman Richard Neal, a Democrat from Massachusetts. Of the 13 House members who signed the above letter, nine are still in Congress. As for the other four, two retired: Dave Reichert of Washington and Sam Johnson of Texas. And two were defeated: Carlos Curbelo of Florida and Erik Paulsen of Minnesota. So, yes, some of the members have changed; we doubt that there has been any significant change in the affected Congressional districts, however, or the concerns of constituents.
We can't discuss all of the factors at play here, but these four seem particularly relevant.
First, The Cost Killer
. American steel producers may be benefiting, but steel users are being squeezed. Mid Continent Steel and Wire in southeastern Missouri has lost customers and gained a fair amount of unwanted notoriety as a consequence of the 25 percent tariff on steel. The company's general operations manager, Chris Pratt, recently told St. Louis Public Radio, "Our company is losing money every month. Our employment is down 200 employees since June, and our sales are off 60 percent." The company makes nails, and many of their former customers are now buying from Chinese suppliers, whose raw material costs are unaffected.
Second, Retaliation.
Canada and Mexico have both retaliated with new tariffs on U.S. exports. Canada's lists cover some $12.5 billion in U.S. exports ($16.6 Canadian), and Mexico is retaliating against roughly $3 billion in products from the U.S. Mexico's retaliation is largely in agriculture, everything from pork to cheese. Canada's counter-measures hit American steel and aluminum exports along with an array of other products.
Third, A False Lead
. Throughout this past year the Trump administration has walked a fine line, two lines actually. On the one hand, it has consistently maintained that the actions against steel and aluminum imports was separate from the negotiations over a replacement for NAFTA, now the USMCA. By the same token, however, it repeatedly suggested a linkage between the two. The Wall Street Journal's December 27 editorial spelled the issue out clearly, including this quote from a Senate appearance by USTR Robert Lighthizer:
"Resolving the NAFTA issue-we would expect, or hope, that we would resolve the steel and aluminum issues with both Mexico and Canada."
Fourth and Finally, Implementation
. The letter above strongly suggests that 232 tariffs on steel and aluminum from Canada and Mexico need to be lifted before Congress is asked to approve implementing legislation for the United States-Mexico-Canada Agreement. So, it is unlikely that Congress will in the end just ignore those tariffs and move directly to a USMCA implementing bill. It is even more unlikely that Mexico and Canada will ratify and implement the USMCA while their exports are being hampered by the 232 tariffs. That topic deserves more consideration, and we shall return to it soon. The point here is that this opera has three fat ladies, and they are all in the wings.
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