Canada is ‘collateral damage’in trade war

Manufacturing sector in Canada reliant on Chinese products likely to suffer

OTTAWA — Grim scenarios of collateral damage for Canadian consumers and businesses are emerging in response to escalating the U.S.China trade war.

Trump’s Washington has taken aim at China by imposing a 25 per cent tariff on goods worth $34 billion US, but the worst is still on the horizon.

The U.S. has announced a further round of tariffs on $200 billion worth of Chinese goods that could go into effect toward September, after Congress takes a closer look at the implications in a round of hearings in five weeks.

It amounts to more economic pain for Canadian consumers and businesses, which are already coping with the effects of their country’s own trade war with the U.S. over President Donald Trump’s imposition of steel and aluminum tariffs on Canada.

Trade experts and analysts say it’s too early to predict which specific products and sectors would be hit the hardest if the next round of U.S. tariffs on China are imposed.

But trade specialists say that with so much of Canada’s manufacturing sector reliant on Chinese products — bits and pieces that wind up in finished items made in Canada — there will be unavoidable consequences.

The pain could start at the CanadaU.S. border, where American customs agents have the broad power to declare anything a Chinese product — even if it was made in Canada.

American customs officials have the discretion to declare any finished product to be of Chinese origin, even if only some of its parts are from China, said Cyndee Todgham Cherniak, a Toronto trade lawyer who has served as an adviser to the Tax Court of Canada.

The onus is on the importer to prove that a product is not Chinese, or “to prove the facts are other than assumed by the customs officials,” she said.

“Even a Canadian-made make-up brush, a Canadianmade power cord — any of these items would be subject to 10 per cent duty going into the United States.”

Canadian companies shouldn’t expect American border agents to do them favours, said Todgham Cherniak.

“The whole goal is buy American and hire American,” she said. “So it doesn’t bother the U.S. customs agent that Canadian manufacturers will be collateral damage in the U.S.-China fight.”

If the Trump administration follows through and imposes more tariffs on a broader range of Chinese goods, fewer of them will wind up in the U.S. That means more potentially cheaper Chinese goods headed to other markets, including Canada, which is a disruption the government needs to address, said Lawrence Herman, a veteran trade lawyer who once headed the Canadian government’s treaty law section.

“Chinese products are going to find their way to Canada one way or another. They’re out there. They’re being made,” said Herman.