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Nicolas Lamp
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Given how nebulous the criteria for the re-imposition of Section 232 measures are, I don't think that Canada and Mexico will feel strongly constrained by their agreement only to retaliate in the steel and aluminum sectors. However, I don't see that as something to worry about. The constraint on both parties' actions in a tit-for-tat retaliation scenario is not the fear of legal consequences - it is the fear of counter-retaliation. We would face an escalation if Canada or Mexico retaliated in an amount that exceeds the amount of trade affected by the Section 232 measures - in that case, the US would probably expand the scope of the Section 232 measures to match the level of retaliation, and we might end up with a protectionist spiral. Given how disciplined Canada and Mexico have been about matching (and not exceeding) the commercial impact of the Section 232 measures in the past, I would think that such an escalation is unlikely.
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Simon, My understanding is that the process would essentially be a replay of the original Section 232 measures: the US would impose them as it sees fit, and Canada and Mexico will retaliate in the same amount. Since the entire process happens in an extra-legal space and is based on tit-for-tat reciprocity, neither site has an incentive to escalate.
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Dec 12, 2018