Trudeau strikes back in tariff war
Canada retaliates after Trump slaps duty on steel, aluminum imports over NAFTA talks
OTTAWA— Canada hit back at U.S. President Donald Trump on Thursday by announcing tariffs on dozens of U.S. products in retaliation for American steel aand aluminum tariffs that Prime Min- ister Justin Trudeau called a “turning point in the Canada-U.S. relationship.”
Trudeau said Trump’s tariffs, imposed on supposed national security grounds aafter NAFTA negotiations stalled, were ““totally unacceptable” and “an affront” to a country whose soldiers have fought and died with American soldiers.
“We have to believe at some point common sense will prevail. But we see no sign of that in the U.S. action today,” Trudeau said.
Trump’s move will harm Canadian companies and further complicate the talks over the future of continental trade.
The tit-for-tat exchange of tariffs is likely to raise prices on a variety of consumer goods popular with both Canadians and Americans.
Trump is imposing 25-per-cent steel tariffs and 10-per-cent aluminum tariffs on Canada, Mexico and the European Union, all of which he had previously exempted.
“We have to believe at some point common sense will prevail. But we see no sign of that in the U.S. action today.” JUSTIN TRUDEAU
Despite the official national security rationale, U.S. Commerce Secretary Wilbur Ross told reporters that Trump actually acted against Canada because NAFTA talks “are taking longer than we had hoped.”
Trudeau responded with a list of tariffs to take effect July 1 on more than 100 U.S. products. The list includes not only industrial steel and aluminum items but consumer products, from ketchup to dishwasher detergent to boats to toilet paper to playing cards to insecticide to washing machines.
Trudeau’s retaliatory measures and sharp criticism were a marked shift in his approach to the U.S. after more than a year of trying to avoid confrontation with the impulsive president. Asked if he was starting a trade war with the U.S., Trudeau replied: “I’ve said for a long time we were ready for anything.”
Canada plans to hit the U.S. steel items with a 25-per-cent tariff, the consumer goods with a10-per-cent tariff.
Foreign Affairs Minister Chrystia Freeland said Canada was also launching a challenge to Trump’s tariffs at the World Trade Organization.
Trump said in a nighttime statement: “The United States has been taken advantage of for many decades on trade. Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State (sic) will agree to a fair deal, or there will be no deal at all.”
The Canadian measures take aim at $16.6 billion worth of goods — equivalent to the 2017 value of Canadian steel and aluminum exports hit by the American tariffs, Freeland said — and are designed to make U.S. officials sit up and take notice.
“This is the strongest trade action Canada has taken in the postwar era,” Freeland said.
Asenior Canadian official said the list is designed to exert maximum political pressure on Congress, with an eye on particular districts and individuals of both parties. The official said the target list skews toward Republicans, since they control the White House and both chambers of Congress.
Trade lawyers at the firm of Borden, Ladner, Gervais pointed out Ottawa has targeted large industrial states in the American northeast and upper midwest, the source of much of the U.S. steel that makes its way to Canada. Other targets: agriculture and agrifood products from key farming constituencies, and products from potential swing states in the midterm elections. The list includes whiskey, a popular export from Senate Majority Leader Mitch McConnell’s home state of Kentucky.
“The list is economically calibrated and it’s politically calibrated,” said BLG lawyer Jesse Goldman. “There are products on that list that are targeted to hurt U.S. exporters in key states in order to maximize the political pressure in the U.S. So there’s a short game and a long game here.”
Trudeau said at a news conference that Trump scuttled what the prime minister thought was an all-but-finished North American Free Trade Agreement deal by demanding Canada sign onto a five-year “sunset clause” before Trump would even agree to meet Trudeau this week in Washington. Trudeau refused.
The White House disputed Trudeau’s claim, according to BuzzFeed, with Pence saying they were never close to a deal.
The U.S. tariffs go into effect Friday. The Canadian tariffs don’t take effect for a month, effectively giving Trump time to back down. But if they do kick in, they will remain in place until the U.S. removes its own tariffs on Canadian products, Freeland said.
The tariffs are a tax on imports from the U.S. While Freeland said officials tried to pick items where Canadian consumers could find replacements for the U.S. products, either from Canada or elsewhere, Canadian grocers and other retailers might pass along the cost of the tariffs by raising the prices of the U.S. goods Canadians like best.
Mexico and the EU also announced plans to retaliate with tariffs on U.S. products. Like Canada, their lists include products from states of political importance. Both Canada and the EU lists, for example, include orange juice, an export important to the swing state of Florida.
The economic purpose of the tariffs is to make imports from Canada, Mexico and the EU more expensive for American customers, in theory compelling them to use American products instead.
But some are likely to continue to use many Canadian products even at higher prices. Analysts said U.S. producers cannot meet all the domestic demand.
“In the broad, it should not be terribly damaging to Canada. Because the United States does rely on Canada for substantial steel and aluminum imports, and that can’t be replaced quickly, if at all. But for specific firms and for specific steel and aluminum products, the immediate impact could be significant,” said Scotiabank deputy chief economist Brett House.
The Canadian steel industry is concentrated in Ontario, the aluminum industry in Quebec. The tariffs could have a disproportionate impact in Hamilton and Sault Ste. Marie.
But Chuck Bradford, a U.S.based metals analyst, said there would be “no effect” on Canadian steel producers.
Their U.S. customers, he said, “may not have any choice: there may not be any steel available of the grades they need.”
And even if there is, Bradford said, they may be most comfortable sticking with their previous supplier.
“If you’re an automaker … you’d like the supplier that you have, because you know your equipment works well with their type of steel,” he said.
The U.S. is the destination for about 90 per cent of Canada’s steel exports, more than $5 billion worth a year. Canada is the source of 17 per cent of all steel the U.S. brings in from abroad.