U.S. STARTS TRADE WAR
Canada hits right back
Canada joins EU, Mexico in levying U.S. imports
The U.S. sparked a global trade war Thursday after announcing it was imposing steel and trade duties on some of its closest allies.
Canada responded by imposing levies on $16.6 billion of U.S. imports, everything from steel and aluminum to playing cards and strawberry jam. The European Union said it would target more than $4 billion in American products from Harley-Davidson motorcycles to Levi’s jeans to bourbon.
The Mexican government said it would levy import taxes on U.S. exports of pork bellies, apples, cranberries, grapes, certain cheeses, and various types of steel.
Foreign Affairs Minister Chrystia Freeland, in a joint press conference with the prime minister, said, “This is $16.6 billion of retaliation. This is the strongest trade action that Canada has taken in the post-war era.”
“These tariffs are totally unacceptable,” said Justin Trudeau about the U.S. levies. “We have to believe that at some point their common sense will prevail. But we see no sign of that in this action today by the U.S. administration.
“These tariffs are an affront to the longstanding security partnership between Canada and the United States and in particular an affront to the Canadians who have fought and died alongside their American brothers-inarms.”
In Brussels, a clearly frustrated Jean-Claude Juncker, the European Commission president, said, “This is a bad day for world trade. This is protectionism, pure and simple.”
France’s finance minister, Bruno Le Maire, warned that the U.S. tariffs would be dangerous and unjustified.
“It’s entirely up to U.S. authorities whether they want to enter into a trade conflict with their biggest partner, Europe,” he said Thursday after meeting with U.S. Commerce Secretary Wilbur Ross.
“Global trade is not a gunfight at the OK Corral,” he said. “It’s not about who attacks whom, and then wait and see who is still standing at the end.”
WE HAVE TO BELIEVE THAT AT SOME POINT THEIR COMMON SENSE WILL PREVAIL. BUT WE SEE NO SIGN OF THAT IN THIS ACTION TODAY BY THE U.S. — PRIME MINISTER TRUDEAU
Ross tried to downplay the tit-for-tat moves, telling CNBC, “These are blips on the radar screen. I don’t think they change the fundamentals of the relationship.
“Everybody has spats every now and again, every family does, every country does with others, there’s nothing weird about that. I think everybody will get over this in due course.”
The decision to impose tariffs — 25 per cent on imported steel, 10 per cent on aluminum — take effect Friday and marks the administration’s most aggressive trade action yet against major U.S. trading partners, which had been fighting for permanent relief. The EU, Canada and Mexico together account for about 40 per cent of U.S. steel imports. Canada’s steel industry employs 23,000 workers and added $4.2 billion annually to gross domestic product last year.
Ross said there wasn’t enough progress in discussions with the EU over trade concessions and Canada and Mexico on rewriting the North American Free Trade Agreement to give them permanent exemptions from the metals tariffs. Ross said he was looking forward to “continued negotiations” with the three countries to resolve the issues.
Economist Douglas Irwin, author of a history of U.S. trade policy since 1763, predicted the move by the U.S. could rebound on America.
“It’s more than highly unusual. It’s unprecedented to have gone after so many U.S. allies and trading partners, alienating them, and forcing them to retaliate,” he said. “It’s hard to see how the U.S. is going to come out well from this whole exercise.”
Oliver Rakau, an economist with Oxford Economics, warned that the tariffs could cause the U.S. economic damage because “the spectre of an escalation is likely to weigh on business sentiment and may derail the investment recovery.”
The Trump administration is also considering tariffs on U.S. auto imports — which could hit top suppliers from Canada, Mexico, Japan and Germany — and plans to levy duties on $50 billion in Chinese goods.
The rising trade tensions come as G7 finance ministers including U.S. Treasury Secretary Steven Mnuchin and central bank governors prepare to meet in Whistler, Alta.
Stocks in the U.S. fell as the administration ignored pleas from business lobbying groups including the U.S. Chamber of Commerce to forgo tariffs. The shares of major American steel producers, which have supported the tariffs, rose on Thursday’s news. Canada’s main stock index largely shrugged off escalating trade tensions, while the loonie dipped following the news.
The steel and aluminum levies could play well with Trump voters in Rust Belt states in the lead-up to congressional midterms in November. But the tariffs aren’t popular among pro-trade lawmakers in Trump’s own Republican Party.
Republican Sen. Ben Sasse of Nebraska said, “This is dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents.”