“More moments of drama” expected as Canada readies countertariffs against the U.S.

“More moments of drama” expected as Canada readies countertariffs against the U.S.

HAMILTON, Ont. — 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.

Unveiling the moves before a line of steelworkers at the Stelco Holdings Inc. plant in Hamilton on Friday, Foreign Minister Chrystia Freeland said she was hopeful Canada’s dollar-for-dollar response would not prompt further tariffs from the U.S.

“Canada’s approach is and will be this: we will not escalate and we will not back down,” she told reporters, calling the Canadian tariffs “measured, perfectly reciprocal” and permitted under World Trade Organization rules.

Canada’s retaliatory tariffs — a response to U.S. President Donald Trump’s duties of 25 per cent on Canadian steel and 10 per cent on aluminum — are designed to deliver deep, targeted blows both in the Rust Belt states that voted him into power and in Republican states in the Midwest.

In addition to steel and aluminum products, the items on the final list include a broad swath of goods such as ketchup — a key product in Pennsylvania, home of condiment giant Kraft Heinz Co. — orange juice, playing cards and pens.

Prior to the kickoff of North American Free Trade Agreement negotiations last summer, Freeland said she recalled believing there would be “moments of drama” in the process.

“I think that prediction has been borne out and I think all of us anticipate there will be some moments of drama in the future.”

As part of the $2-billion aid package for the steel, aluminum and manufacturing industries, Ottawa will provide liquidity support to affected businesses and increase jobs and training funds for workers in provinces and territories affected by the tariffs.

To help businesses retain skilled workers, the duration of work-sharing agreements will be doubled under the employment insurance program to 76 weeks from 38 weeks.

Export Development Canada and the Business Development Bank of Canada have promised $1.7 billion in loans and services to assist the aluminum and steel sectors, including small- and medium-size business affected by the U.S. tariffs.

Another $250 million will be assigned through the Strategic Innovation Fund to bolster the competitiveness of Canadian manufacturers and better integrate aluminum and steel supply chains.

Canada will also spend $50 million over five years to help companies diversify exports and take better advantage of the new free trade agreement with Europe and the Trans-Pacific Partnership.

In addition to providing financial support, the government will continue to study whether potential safeguards are necessary to protect the Canadian market, said Economic Development Minister Navdeep Bains, who was also in Hamilton for the tariff announcement.

The support measures are intended to help Canadian firms manage the tariffs as well as innovate for the future, he said.

With NAFTA negotiations dragging on, Marvin Ryder, a business professor at McMaster University in Hamilton, said Ottawa “had to do something active” to assist companies and workers caught in the crossfire of the trade dispute.

“If they didn’t, they could be accused of fiddling while Rome burns,” he said.

Nevertheless, the funding to help companies build new markets for their products “could be just the kick in the pants companies need,” he added. “This is something Canadian companies have needed to do for a long time.”

Ryder was less optimistic about whether the U.S. would hold off on imposing further tariffs against Canada.

“In Donald Trump’s world, I wouldn’t count on that,” he said. “Donald Trump takes everything personally.”

Though Canada’s response may well be measured and balanced, “Mr. Trump doesn’t think we should respond at all,” Ryder added. “Therefore, I suspect he’s going to do something else. This is going to keep heating up before it gets better.”

Trump has already ordered Commerce Secretary Wilbur Ross to investigate whether auto imports pose a national security threat, and suggested he could impose tariffs of up to 25 per cent on vehicles and parts.

And earlier this week, U.S. Trade Representative Robert Lighthizer issued a statement defending the imposition of U.S. steel and aluminum tariffs on national security grounds, and said retaliatory levies proposed by the European Union, China and others are “distorting” WTO rules.

“Faced with these unjustified tariffs, the United States will take all necessary actions under both U.S. law and international rules to protect its interests,” he said in the statement.

Freeland said there were “absolutely no grounds” for a U.S. tariff on autos, but said the government was prepared for all possible outcomes.

Canada will continue to work toward a new NAFTA agreement even as the retaliatory tariffs kick in, she said, adding that she is in “very frequent contact” with U.S. officials on the file and has spoken to Lighthizer six times in the past week. NAFTA negotiations are expected to move into an “intensive phase” following national elections in Mexico on Sunday.

“I’ve expressed our willingness to return anytime, anywhere to discuss this issue,” Freeland said.

Financial Post

npowell@postmedia.com

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