Design Engineering

Another Canada-U.S. trade war is brewing

By Alexander Panetta   

Materials Steel trade Trump U.S.

Trump boasts that "trade wars are good, and easy to win"...we will soon see if he's right as Canada vows to retaliate if tariffs are imposed.

tech investment canada/us tax steelWASHINGTON — The Trump administration is being lobbied hard to spare Canada from planned tariffs on steel and aluminum, with even supporters of the U.S. president decrying the idea of penalties on the northern neighbour as ill-conceived and counter-productive.

News that Donald Trump is considering broad tariffs on the global steel and aluminum industry prompted members of his own party to warn of fractured alliances, rising costs for consumers, and unintended economic and geopolitical consequences.

He says final details are coming next week. He’s evincing a damn-the-torpedoes attitude so far: “Trade wars are good, and easy to win,” the president tweeted Friday, arguing that the U.S. import-export deficit means it can afford to slow global trade.

But past and present U.S. military figures, a usually Trump-friendly editorial board, a supportive union, fellow Republicans and even companies that would otherwise benefit from tariffs, have urged Trump not to impose them on the U.S.’s No. 1 seller: Canada.


That includes the editorial page of the Wall Street Journal. Normally a Trump cheering corner, the opinion section of the pro-business newspaper ran an editorial titled, ”Trump’s Tariff Folly: His Tax On Aluminum And Steel Will Hurt The Economy And His Voters.”

It noted that Canada supplies more steel to the U.S. by orders of magnitude than China — the supposed target of this tariff.

“The tariffs will whack that menace to world peace known as Canada, which supplies 16 per cent (of U.S. steel imports),” said the paper.

“Canada buys more American steel than any other country. … Mr. Trump is punishing our largest trading partner in the middle of a NAFTA renegotiation that he claims will result in a much better deal. Instead he is taking a machete to America’s trade credibility.

“Why should Canada believe a word he says?”

Trump is hearing the same from the military.

The ostensible excuse for these tariffs is that foreign steel undermines U.S. national security, making emergency measures legitimate. Trump plans to use a provision in U.S. law that allows the president to impose tariffs if it’s a security matter. His administration has indeed declared it a security issue, and Trump says he’s leaning toward bigger penalties than many expected — a 25 per cent global tariff on steel and 10 per cent on aluminum.

But Trump’s own defence secretary, James Mattis, undermined the case for tariffs in a letter released several days ago. He said the military had more than enough steel for its needs, expressed concern broad tariffs would hurt key allies, and urged that any tariffs be narrowly focused.

Numerous Republican politicians have also urged the president to narrow his focus, from the broad tariff plans he has signalled.

The administration has been hearing this for months.

As it prepared its national-security study, witness after witness suggested Canada be exempted like it was from U.S. steel actions in the early 2000s and 1980s. Meanwhile, not one witness specifically called for tariffs on their northern neighbour.

A retired U.S. army brigadier-general, John Adams, an expert on the defence-industrial complex, testified that he supported tariffs, with one exception: “The one supplier in whom I have complete confidence is Canada.” He added that Canada should bolster its monitoring of dumped imports.

Two of the people in the room with Trump when he announced his tariffs Thursday, and who mostly support his action, expressed similar pro-Canada views.

Michael Bless, chief executive of the Century Aluminum Company, said in his submission to the U.S. government: “As a contiguous, friendly neighbor, Canada is a safe and reliable source of supply. In Century’s view, (these penalties) can be effective without applying it to Canada.”

John Lapides, president of a fourth-general family aluminum mill, said in his submission to the Department of Commerce study: “We are in favor of international trade. Canada, for example, produces ingot and the slabs used for hot rolling essential to U.S. rolling mills and the downstream value chain.”

Both were in the cabinet room with Trump for the tariff announcement.

Other companies made such submissions to the U.S. government.

Bob Prusak, chief executive of Magnitude 7 Metals, testified that he opposed sanctions relief for anyone, with one exception: “Other than Canada.”

Marco Palmieri of Novelis North America said the aluminum industries of the U.S. and Canada are intertwined, Canada plays a vital role in U.S. aluminum manufacturing efforts, and that, “to ensure the viability of the U.S. aluminum industry, the Department should exclude Canada from any remedy recommendation made in its final report.”

The United Steelworkers union strongly favours tariffs — but not in Canada. The politically active union has members in both countries, and its president, Leo Gerard, is originally from Ontario.

Its written submission called for a Canadian exemption. Its statement following Trump’s preliminary announcement repeated the demand.

“All this BS,” Gerard said in an interview, when asked earlier this week about the prospect of Canada being targeted.

“Canada should just be excluded — period. We have an integrated economy. And if it gets undone, America will pay a heavy price.”

Several countries, including Canada, have hinted at retaliation if the U.S. imposes tariffs.

Some trade-watchers say that’s the biggest danger here: Not simply that prices might rise for goods in the U.S., and fall on commodities elsewhere, but that turning national-security excuses into a trade weapon will prompt other countries to follow suit, and lead to escalating feuds that tear at the post-Second World War trading order.


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