Trump Gets Tough on Trading with Canada

 

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WASHINGTON DC – Canada has become the surprise No. 1 target in President Trump’s push to get tough on trade. Trump fired the opening shots of a potential trade war this week by slapping a tariff of up to 24 percent on Canadian softwood lumber imports.

He also threatened action to protect U.S. dairy farmers, which could complicate any future talk of renegotiating the North American Free Trade Agreement (NAFTA).

The moves escalated a spat between neighbors that typically have one of the friendliest cross-border relationships in the world.

“He made a lot of promises on trade modifications during the campaign,” said Laura Dawson, director of the Canada Institute at the Woodrow Wilson International Center. “Because Canada is the largest U.S. trading partner, it’s natural that a Canadian trade issue would be top of mind.”

The dispute could have wide-ranging effects on the American economy; Canada and the U.S. had $575 billion in two-way trade in 2015.

Trump and his advisers on Tuesday downplayed concerns about a broader trade war with Canada.

“No,” the president told reporters when asked if he fears one. “They have a tremendous surplus with the United States. Whenever they have a surplus, I have no fear.”

Commerce Secretary Wilbur Ross also brushed off concerns about a trade war.

“That would be a stimulatory thing for all your readership. We don’t think that’s going to happen,” he told reporters at the White House.

Still, Trump and Ross said the administration wouldn’t back down from confronting one of its chief trading partners for what it says are unfair practices.

“Everyone thinks of Canada being wonderful and civil. I love Canada. But they’ve outsmarted our politicians for many years, and you people understand that,” Trump said.

Trump’s actions have won praise from lawmakers in both parties.

Canadian officials have sought to calm talk of a trade war but warned that the lumber tariffs could hurt the U.S. more than it realizes by driving up the price of new homes.

“You need our lumber to build your homes,” Canadian Foreign Minister Chrystia Freeland said Tuesday on CNBC.

“I think there would be a real concern that by imposing these nontrivial tariffs on Canadian lumber, [Trump] would be sacrificing more construction jobs than he is saving more timber jobs,” said Lee Branstetter, a nonresident senior fellow at the Peterson Institute of International Economics.

Canada was not initially at the top of Trump’s list of trade offenders, though he has frequently criticized NAFTA.

Trump had seemed much more focused on China, though earlier this month he decided that Beijing was no longer manipulating the value of its currency. That announcement came as Trump sought cooperation from China on issues pertaining to North Korea.

Despite the massive goods exchange between the United States and Canada, the relationship is relatively balanced. The U.S. only had a $15 billion trade deficit with Canada in 2015, according to the U.S. trade representative.

It’s hardly the first time there has been a trade dispute between the U.S. and Canada.

The fight over softwood lumber dates back to the early 1980s. U.S. lumber producers have long argued Canada illegally subsidizes its industry because it allows companies to source timber from government-owned lands. Canadian authorities have denied they do so.

The latest tariffs were anticipated after the U.S. and Canada let a truce on the lumber issue expire in 2015. Former President Obama and Canadian Prime Minister Justin Trudeau failed to broker an agreement to extend it last year.

Experts say the moves could signal a tougher renegotiation of NAFTA than Trump signaled back in February.

“These irritants could have a negative affect on the NAFTA negotiations,” said Dawson. “The biggest concern is the agreement is ripped up entirely. It could really destabilize how all of us do business.”

“It’s certainly going to be more than a tweak. It’s going to be a serious negotiation,” said David Wilkins, former U.S. ambassador to Canada under President George W. Bush.

The development is surely a disappointment to Trudeau, who hoped his friendly approach to Trump would pay off.

Although the two leaders are on opposite ends of the political spectrum, Trudeau has tried to charm the president since he took office on Jan. 20.

Trudeau gifted Trump a photo of the president with his father, former Canadian Prime Minister Pierre Trudeau, during his February visit to the White House. He also held back on his prior criticism of Trump’s hard-line stance against refugee resettlement.

“The last thing Canadians expect is for me to come down and lecture another country on how they choose to govern themselves,” Trudeau said at a joint press conference.

In March, Trudeau invited Trump’s daughter Ivanka to a Broadway play. The show, titled “Come From Away,” told the story of a small Newfoundland town that sheltered thousands of airline travelers from around the world after the 9/11 terrorist attacks.

But Trump has been unafraid to go after some of the United States’ closest allies with tough language.

The president last week called the Canadian dairy dispute a “disgrace.”

He held a tense call in February with Australian Prime Minister Malcolm Turnbull, in which he blasted a bilateral refugee agreement as “the worst deal ever.”

Vice President Pence patched up the situation during his trip to Australia last weekend, reaffirming that the U.S. would “honor” the deal.

But longtime watchers of the relationship expressed confidence that Trump’s tough talk wouldn’t poison broader U.S.-Canada ties.

“I don’t take the attitude that the sky is falling in on our relationship,” said Wilkins. “We have the best relationship in the world, and a lot of people want to keep it that way. I think it’s going to stay that way.”

By Jordan Fabian – The Hill