Hardship from U.S. tariffs has arrived
HARDSHIP FROM U.S. TARIFFS HAS ALREADY ARRIVED IN CANADA
The human collateral damage of Donald Trump’s trade spoliation appeared in Ottawa Tuesday, to explain how the tariffs imposed by the U.S. on steel and aluminum imports are already causing hardship and job losses in Canada.
The alarming testimony before an emergency meeting of the international trade committee suggested that without government assistance, previously healthy businesses will go under within weeks.
There was also a very real sense that Canada is at the U.S. president’s mercy if he decides to follow through on his threat to impose 25-per-cent tariffs on this country’s auto industry.
“There’s not an assembly plant in the country that could survive a 25-per-cent tariff,” said Jerry Dias, president of Canada’s largest union, Unifor.
Robert Dimitrieff, president of the Brantford, Ont.-based specialty steel company Patriot Forge, told the committee his business was founded in 1976 by his father to supply the power generation industry and the military with tough, forged steel.
It now employs 250 people in two plants in Brantford and nearby Paris.
But Dimitrieff said the company will close “within a few months,” unless it receives some relief from tariffs.
Patriot ships 90 per cent of its product to the U.S. but, worse, it will also suffer when Canadian retaliatory measures kick in on July 1 because it imports most of its alloy from specialty steel producers in the States. “At the moment we are paying the difference for our U.S. customers, but that is not a sustainable situation,” he said. “Our latest forecast is that without tariff relief we will pay $682,000 more per month on imported raw materials.”
Stephen Young, senior sales manager at Janco Steel in Stoney Creek, Ont., called for 50 per cent of the proceeds from Canadian tariffs to be distributed to companies hit by U.S. levies so they can maintain existing employment levels and alleviate cash-flow problems. Janco saw its U.S. business fall 60 per cent in June from the previous month. “We’re saying, ‘Keep us in the game.’”
Dias called on the government to “make sure everyone is shored up,” given his estimation that Trump will not seek a NAFTA deal until after the U.S. midterm elections in November.
There was an almost tangible sense of fear in the room about the consequences of Trump imposing a similar tariff on autos. Bob Verwey, president of Owasco, a Whitby, Ont.-based, car and RV business, said his house, his family and the jobs of his 220 employees are on the line. “I believe Trump is a bear and we shouldn’t be poking him too much. Please step quietly,” he urged the MPs.
Yet as United Steelworkers national director Ken Neumann pointed out: “If you don’t poke the bear, he’s going to eat your lunch.”
What was striking was the unanimity in the room between employers and unions, between Liberals, New Democrats and Conservatives in support of retaliatory measures. There was some griping about lack of preparedness for the tariffs already imposed and those that may come. There were calls for the government to impose retaliatory tariffs immediately and to introduce safeguards to prevent steel that was bound for the U.S. being diverted to Canada. (Bloomberg reported Tuesday that Ottawa will impose quotas and tariffs to guard against dumping, mainly from China.)
But there is a sense the Canadian way of life is under assault from an exogenous threat. The subject was also under discussion as finance ministers met just down the road from the trade committee room.
Federal finance minister Bill Morneau is under pressure to respond to a competitiveness situation that was dire even before the steel tariffs were imposed. As C.D. Howe Institute president William Robson revealed last month, for every dollar of new investment a U.S. worker enjoyed in 2017, a Canadian worker attracted just $0.59 — the worst performance on record. “Yet 2018 seems likely to set a new low,” he said.
Robson suggested a change in tone would be a good start: “Less denial that we have a problem and more respect for the businesses, large and small, that we want to tool up.”
A Moody’s Investor Services report released Monday hints at the “car-maggedon” that might follow if Trump uses the national security provisions in Section 232 of the Trade Expansion Act to impose tariffs on imported autos. U.S. manufacturers would shift some or all production back inside the tariff wall and pass on higher costs to consumers, the report said.
“GM would likely face a burdensome and costly challenge of having to shift significant amounts of Silverado and Sierra production back to the U.S. from Mexico and Canada,” it said. (GMC Sierra and Chevrolet Silverado are assembled at the GM plant in Oshawa, Ont., as well as in Mexico.)
The Liberal record on foreign direct investment is woeful — the product of rising taxes and tightened environmental regulations. Statistics show that the inflow of FDI has fallen substantially since 2013, with the pace accelerating after Justin Trudeau took office in 2015. The amount reached a low of $30 billion in 2017 and is likely to fall further in 2018, not least because the purchase of the Kinder Morgan pipeline will reduce the amount by $4 billion.
But despite an investment climate cooled by Liberal policies, there is broad support for the prime minister’s mannerly response to Trump’s thuggery. It may be tempting for the Liberals to press this advantage by calling a snap fall election. “If Trudeau ramped up the Trump rhetoric, his numbers would go through the roof,” said one senior Liberal.
There are no signs of the government gearing up for a fall fight just yet — to do so would require the party to ramp up its nomination process and find candidates in the 155 seats it doesn’t hold (not to mention uncover replacement for the MPs who decide not to run again). Just trying to secure candidates who won’t embarrass the party in unwinnable ridings is a major undertaking.
While it’s not impossible, a fall election would require intense activity over the next two to three months, and there is no chatter to that effect yet.
The Liberal government’s time would be much better spent working out how to keep the fires burning at places like Patriot Forge — and preparing for the nightmare scenario of Canada’s largest manufacturing sector being decimated.