October 1, 2018 / 6:01 PM / 16 days ago

UPDATE 2-Canada, buoyed by trade deal, to push U.S. on metal tariffs

(Adds comments by Trudeau, U.S. trade representative, details, background)

By David Ljunggren

OTTAWA, Oct 1 (Reuters) - Canada, buoyed by a last-minute continental trade deal it sealed with the United States and Mexico, is pressing Washington to remove steel and aluminum tariffs, senior Canadian officials said on Monday.

The agreement, reached on Sunday night, protects Canada’s automotive industry from potentially devastating U.S. tariffs, but includes no assurance that Washington will lift punitive measures it imposed on Canadian and Mexican steel and aluminum in June.

Prime Minister Justin Trudeau had made clear he felt the tariffs should be removed before the new United States-Mexico-Canada Agreement could be signed, but President Donald Trump’s administration has refused to act for now.

“Moving forward on eliminating the tariffs on steel and aluminum remains a priority for us, for Mexico, and is something the Americans have indicated they are more than willing to work on,” Trudeau told a news conference.

U.S. Trade Representative Robert Lighthizer told reporters in Washington that the United States would be willing to discuss the matter “after we take a few days to catch our breath.”

Foreign Minister Chrystia Freeland said talks on the new pact and the question of tariffs were on separate tracks but added “we have a little bit of wind in our sails and we are very much going to continue to work on this issue”.

The United Steelworkers of Canada union called the agreement a “sellout” for steel and aluminum workers.

Business groups largely praised the new agreement, which maintains Canada’s duty-free access to the huge and profitable North American market.

The Canadian dollar hit a four-month high against the U.S. greenback, and investors raised bets for as many as four additional interest rate increases from the Bank of Canada by the end of 2019.

But Canada also had to agree to offer more access to its highly protected dairy market, which infuriated the influential farming lobby. The province of Quebec, a powerful dairy center, said it was examining its options amid speculation it might sue to block the deal.

“We had to make compromises, and some were more difficult than others,” Trudeau said, promising full compensation to dairy farmers who might suffer. “We never believed that it would be easy, and it wasn’t, but today is a good day for Canada.”

Trudeau repeatedly made the point that he had managed to preserve the protected domestic market, which some U.S. interest groups said should be scrapped.

The concessions are in theory a problem for Trudeau, whose ruling Liberals say they need to pick up seats in Quebec in an election set for October 2019 if he is to retain power.

That said, farmers who initially protested when the previous Conservative government agreed to open up the market slightly in deals with the European Union and Pacific nations backed off when Ottawa made clear they would be compensated.

Polls show that Trudeau is still personally popular in Quebec and that the Liberals easily would win a federal election if one were held now.

Additional reporting by Allison Martell in Toronto and Rod Nickel in Winnipeg; editing by Jonathan Oatis and Marguerita Choy

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