by Jenny Leonard, Joe Deaux and Josh Wingrove

The U.S. will lift steel and aluminum tariffs on Canada and Mexico in favor of stronger enforcement actions, in a move that will help clear the way for ratification of the new NAFTA.

In a joint statement on Friday, the U.S. said it removed metals tariffs on Canadian steel and aluminum imports in exchange for Canada scrapping retaliatory tariffs on U.S. goods. The deal will take effect in no longer than two days, according to the statement. Mexico plans to make announcement later in the day, according to people familiar with the matter.

The move would lift the 25% steel and 10% aluminum tariffs the U.S. placed on the two trading neighbors almost a year ago in the name of national security. The decision sparked retaliatory duties from Canada and Mexico on U.S. farming goods and other products, and became an obstacle for lawmakers in all three nations to ratifying the deal.

As part of the agreement to scrap the levies, the U.S. will be able to re-impose the tariffs on metals imports if not enough is done to prevent a surge of imports beyond historical levels. The nations have also agreed to ramp up efforts to trace where the metals have come from originally, to stop the diversion of shipments from other nations to dodge tariffs, according to people familiar with the matter.

The enforcement system will aim to advantage primary steel and aluminum producers in the three-nation trading bloc to ensure that the metal is melted, poured or smelted regionally.

Steel tariffs

U.S. steelmakers and aluminum producers rebounded off Friday’s lows on optimism that the measures will prevent excess supply from flooding their domestic markets.

A S&P gauge of 13 steelmakers pared losses to 2.9% at 12:18 p.m. in New York. The index was down as much as 3.3% earlier. Alcoa Corp., the largest U.S. aluminum producer, was down 1.8%, after sliding as much as 2.4% earlier. Canadian producer Stelco Holdings Inc. rallied as much as 5%, erasing a loss of 1.5% earlier.

The tariffs have stood in the way of getting Trump’s new North American trade deal approved by Congress, and ratified in Canada and Mexico. Republican senators, led by Finance Committee Chairman Chuck Grassley of Iowa, have emphasized the urgency of approving Trump’s new North American trade deal, known as the USMCA, as well as the importance of removing existing tariffs and avoiding new ones.

Related: Grassley to Trump: Lift tariffs or USMCA is dead - The Hill 

--With assistance from Stephen Wicary, Eric Martin, Joe Richter, Margaret Talev and Jennifer Jacobs.

To contact the reporters on this story:

Jenny Leonard in Washington at [email protected];

Joe Deaux in New York at [email protected];

Josh Wingrove in Ottawa at [email protected]

To contact the editors responsible for this story:

Luzi Ann Javier at [email protected];

Michael Shepard at [email protected]

Sarah McGregor, Chris Fournier

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