UPDATE 2-U.S. close to resolving tariff dispute with Canada, Mexico -Mnuchin

The United States is close to resolving a dispute over steel and aluminum tariffs with Canada and Mexico, U.S. Treasury Secretary Steven Mnuchin said on Wednesday, but Canada's foreign minister avoided direct comment on the prospects for a deal. "I think we are close to an understanding with Mexico and Canada," on resolving the tariffs, Mnuchin said at a U.S. Senate Appropriations subcommittee hearing. He did not provide any details about the potential agreement.

Canadian Foreign Minister Chrystia Freeland said she discussed the "Section 232" tariffs on Canadian metals with U.S. Trade Representative Robert Lighthizer on Wednesday but declined to say whether the two countries were close to a deal. "We made the case as we have been doing for some time that the best outcome for both Canadians and Americans would be to lift those tariffs and to have free trade between our two countries who have this fantastic trading relationship in place," Freeland told reporters after the meeting in Washington.

Asked by about prospects for a deal later in the day, Freeland said she would not discuss Canada's negotiating strategy. She added that if Washington keeps the tariffs in place, it would be "very, very problematic" for Canadian ratification of the new U.S.-Mexico-Canada Agreement trade deal (USMCA). Canada, Mexico and a number of U.S. lawmakers view the lifting of the tariffs imposed last year as a condition for ratification of USMCA, which would replace the 25-year-old North American Free Trade Agreement. None of the three countries' legislatures have ratified USMCA.

Mexican Economy Minister Graciela Marquez on Tuesday said Mexico was "close to negotiating the lifting of tariffs." Canada has been trying to impress upon the Trump administration that time is running out to ratify the USMCA pact this year, a Canadian government source told Reuters.

A bill to ratify the deal would have to be approved by Canada's House of Commons, which adjourns for the summer on June 21 ahead of an October general election. It will not reconvene until December. Lighthizer later met with U.S. House of Representatives Speaker Nancy Pelosi to discuss the path forward on a potential USMCA vote. A Pelosi aide called the meeting productive, but offered few details.

"Democrats continued to express our interest in working with the USTR to get to yes, and will be planning more discussions with the USTR on the key questions about the USMCA proposal," the aide said. (Reporting by David Lawder and Susan Heavey in Washington and David Ljunggren in Ottawa; Editing by Paul Simao and Tom Brown)

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