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Trudeau and Trump clash over lumber and dairy tariffs
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Trudeau and Trump clash over lumber and dairy tariffs
US and Canada are set up for wider battle as they renegotiate Nafta
https://www.ft.com/content/525756a0-2943-11e7-9ec8-168383da43b7
by: Demetri Sevastopulo, Katrina Manson and Anna Nicolaou
by: Demetri Sevastopulo, Katrina Manson and Anna Nicolaou
A US-Canada trade dispute intensified on Tuesday as Justin Trudeau and Donald Trump clashed over softwood lumber and dairy tariffs, setting the two countries up for a wider battle as they renegotiate the North American Free Trade Agreement.
On Tuesday evening the White House said that Mr Trump and the Canadian prime minister had a “very amicable call” and had discussed the dairy trade as well as lumber coming into the US. However, Mr Trudeau said he refuted “baseless allegations” by the US, pledging to “vigorously defend” Canada’s softwood lumber industry after the Trump administration imposed new tariffs on it on Monday.
Mr Trump earlier on Tuesday hit out at Canada over the dairy trade, threatening to broaden his actions beyond lumber. The US president said on Twitter that Canada had “made business for our dairy farmers in Wisconsin and other border states very difficult”. The comment came after a dairy dispute bubbled up last week when Canada pledged to support domestic dairy farmers, who can sell their ingredients to Canadian cheese makers and yoghurt producers for less than equivalent imports.
Wilbur Ross, US commerce secretary, told the Financial Times on Monday that the US would place “countervailing duties” that ranged from 3 per cent to 24 per cent on five Canadian lumber exporters, after concluding that Canada subsidises its industry in a way that hurts the US.
The Canadian companies are Canfor, JD Irving, Resolute FP Canada, Tolko Marketing and Sales and West Fraser Mills.
The Canadian dollar on Tuesday fell to a 14-month low of 73.55 versus the US dollar as investors feared that the actions would open larger problems in a renegotiation of Nafta.
Asked on CNBC whether the Trump administration’s move was the start of a trade war, Chrystia Freeland, minister of foreign affairs, replied: “No, absolutely not.”
The moves, which come as Mr Trump approaches his 100th day in office, are the latest example of the US president following through on his campaign promise to take a tougher stance on trade practices that the US considers unfair.
Disputes over lumber have flared up sporadically since the 1980s between the two countries, and the latest one comes as “little surprise”, said analysts at TD Bank, even if Mr Trump’s “leanings clearly cast this in a more contentious light”. They warned that the US-Canada trade relationship, worth $545bn in goods in 2016, “may become more complicated in the months ahead” as lumber is likely to get rolled into Nafta negotiations.
The Canadian government on Monday evening said the tariffs were “unfair and punitive”, and would hurt Americans wanting to build homes.
The US says Canada is subsidising softwood lumber exports because the Canadian provinces that own the forests from where wood is sourced subsidise logging. Mr Ross said this practice allowed Canada to dump softwood lumber, which is largely used to build homes, in the US at below-market prices.
“These duties will be applied retroactively — 90 days backward — because they were on notice that this was forthcoming and they didn’t change the practice of dumping subsidised lumber,” said Mr Ross.
“It is around $5bn a year worth of lumber that comes in this way,” he said. “And the Canadians have roughly a 31.5 per cent market share of the whole US softwood lumber [market].”
Jim Carr, Canada’s minister of natural resources, and Ms Freeland said in a statement on Monday: “This decision will negatively affect workers on both sides of the border, and will ultimately increase costs for American families who want to build or renovate homes.” The US National Association of Home Builders had calculated that a $1,000 increase in the cost of a new house would put home ownership beyond the reach of more than 150,000 American families, they said, and would jeopardise thousands of US construction jobs.
They added: “The government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation. In ruling after ruling since 1983, international tribunals have disproved the unfounded subsidy and injury allegations from the US industry. We have prevailed in the past and we will do so again.”
Mr Ross said the US had attempted to find a solution, but that they were “not able to achieve a fair result”. He said Canada benefited from a provision in Nafta that would allow it to choose three out of the five people who would serve on a panel to resolve the dispute.
“Bizarrely the Canadians get to pick three, we get to pick two, so you can imagine what our batting average is with that kind of a ratio,” said Mr Ross.
Follow Demetri Sevastopulo on Twitter: @dimi
