Canada hits back at US with $12.6 bn in retaliatory tariffs

Gladys Abbott
June 30, 2018

U.S. President Donald Trump has specifically targeted Canadian steel and aluminum makers with tariffs of 25 per cent and 10 per cent, respectively, on imports from Canada, justifying the move on the basis of national security.

Canada is winding up for a major counter-strike in its trade fight with the United States, confirming that a final list of $16.6-billion worth of American goods will be hit with retaliatory tariffs on Canada Day, while also pledging up to $2 billion in financial support for the steel and aluminum sectors. Canada buys more American steel than any other country in the world, accounting for 50 per cent of US exports.

Food and consumer items - everything from dishwashing liquid and powerboats to yogurt, ketchup and whiskey - will face 10 percent tariffs.

Numerous goods were chosen to pack a political punch ahead of U.S. mid-term elections in November, targeting Republican-held states and congressional districts.

Instead, Canada is trying to make political life uncomfortable for Trump through the retaliatory tariffs that cover an eclectic mix of products, literally from soup to nuts (of the metal kind).

Chrystia Freeland, Canada's foreign minister, said Friday that Ottawa will slap tariffs on $12.6 billion of US exports starting on Sunday.

U.S. officials have linked the tariffs to slow progress in talks to modernise the North American Free Trade Agreement, which Mr Trump says is a disaster and must be changed.

"This is a perfectly reciprocal action", Freeland said.

"The real solution to this unfortunate and unprecedented dispute", she said, "is for the United States to rescind its tariffs on our steel and aluminum". She also filed a separate complaint under the North American Free Trade Agreement, arguing the the USA tariffs are "completely unacceptable" and "illegal".

She said Ottawa had little choice but to take action despite the inherent drawbacks of the approach, which include higher costs of goods on each side of the border.

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The two countries, with Mexico, are also locked in negotiations over the North American Free Trade Agreement. If Trump steps up his attacks on Canada's economy and imposes a tariff on automobiles as threatened, it would lead to "carmageddon", Flavio Volpe, president of the Automotive Parts Manufacturers Association, told a Commons committee hearing on Tuesday.

But at the end of May, Trump said that Canada and the European Union would be swept into the tariffs, setting off a series of tit-for-tat tariffs by close USA trading partners. For example, Canada imports just $3 million worth of yogurt from the USA annually and most of it comes from one plant in Wisconsin, the home state of House Speaker Paul Ryan.

It reached new depths at the recent G7 summit when Trump abruptly rejected the joint statement and insulted his Canadian host, Prime Minister Justin Trudeau.

The support measures are meant to help Canadian firms manage the tariffs as well as innovate for the future, he said. The United States is also the top destination for Canadian vacationers, who made 42 million trips to the USA in 2017.

Trudeau also spoke to Mexican President Enrique Pena Neito and updated him on Canada's response to the U.S tariffs. "I think all of us, at this point, fully anticipate there will be some moments of drama in the future".

Canadian Foreign Minister Chrystia Freeland gestures during a joint news conference on the closing of the seventh round of NAFTA talks in Mexico City, Mexico, March 5, 2018.

It's not known how much of that money will come to Alberta (our steel exports to the United States are worth about $500 million compared to about $7 billion for all of Canada).

Ottawa also unveiled Can$2 billion ($1.5 billion) in aid for the two sectors and their 33,500 workers.

Bains, the economic development minister, said the support is aimed at helping firms adjust to the hard circumstances while enabling them to continue to innovate along the way. The auto tariffs would disrupt that.

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