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Ottawa Retaliates to U.S. Metals Tariffs With Matching Countermeasures

Posted June 01, 2018


The Canadian government says it intends to apply tariffs on C$16.6 billion worth of U.S. goods effective July 1 in response to the U.S. Section 232 tariffs on steel and aluminum that Prime Minister Justin Trudeau called a “turning point in the Canada-U.S. relationship.”

The retaliation comes after the U.S. declared that Canada – as well as Mexico and the European Union – would be subject to a 25% tariff on steel products and a 10% tariff on aluminum products starting June 1. Canada, Mexico, and the EU had been temporarily exempted from the tariffs for the past two months pending the outcome of the North American Free Trade Agreement talks and negotiations with the EU over various issues.

In a press conference yesterday with Foreign Affairs Minister Chrystia Freeland, Trudeau denounced the tariffs as “totally unacceptable” and an “affront” to the long-standing military ties and security partnership between the two countries. “That Canada could be considered a national security threat to the United States is inconceivable,” he said. Freeland called it a “specious and unprecedented” use of Section 232.

Freeland said Canada would be instituting “dollar for dollar” tariffs on a diverse range of U.S. goods that will be subject to a 25% or 10% surtax. U.S. steel and iron products will be hit with the 25% rate, whereas aluminum products, select food products such as strawberry jam, ketchup, mustard, chocolate, bourbon whiskey, and dozens of other consumer products will be penalized at the 10% rate. The government says the tariffs will remain in effect until the U.S. removes its punitive levies on Canadian steel and aluminum exports.

“This is the strongest trade action Canada has taken in the post-war era,” Freeland stated. She described the $16.6 billion worth of countermeasures representing the estimated value of Canadian exports affected by the U.S. move as “perfectly reciprocal” – a term President Trump frequently uses to characterize his notion of “fairness” when it comes to trade. “This is a very strong Canadian action in response to a very bad U.S. decision,” Freeland said.

As with the retaliatory tariffs that have also been announced by Mexico and the EU, the various products being targeted by Canada’s countermeasures have been strategically selected to exert the maximum amount of economic pain on Trump’s largely rural political base and specific industries located in the electoral districts of key Republican legislators.

“We expect that in the coming days there will be many members of Congress, many governors who will be making representations directly to the White House on the negative impacts of the measures that the U.S. has put forward and the consequences of the measures that the U.S. put forward,” Trudeau said.

Comment Period

Canada’s retaliatory tariffs are set to go into effect on July 1, following a brief consultation period during which importers may make submissions indicating their concern with the proposed countermeasures including detailed information substantiating any expected adverse impact. Written comments should be provided to the Department of Finance by no later than June 15, 2018 (additional details regarding the information required, etc. are contained in yesterday’s notice).