By Tyler Durden
The trade war between North America’s two biggest economies is just getting started as the United States and Canada begin tit-for-tat trade retaliations.
Ten days after Trump unexpectedly imposed duties on Canadian softwood exports drawing loud protests from domestic lumber companies, the Canadian government has threatened to retaliate with multiple trade actions against the US, demanding a long-term deal without which several American industries could soon be targeted.
Canada’s Prime Minister Justin Trudeau said he would launch the first salvo in a letter to B.C. Premier Christy Clark, informing her that he’s seriously considering her request for a ban on thermal coal exports and that it’s being explored by federal trade officials. The second threat: a direct tit-for-tat escalation, with possible duties against Oregon-based industries. That also happens to be the home state of a Democratic senator, Ron Wyden, who has been a hardliner on the lumber dispute.
“The government of Canada is considering this request carefully and seriously. I have asked federal trade officials to further examine the request to inform our government’s next steps,” Trudeau said, cited by Reuters.
Furthermore, the Canadian government has also found several Oregon business-assistance programs it says may constitute illegal subsidies and is considering a process that could lead to retaliatory duties on imports from that state’s products, such as plywood, flooring, wood chips, packaging material and wine.
While the action taken by Canada is a clear retaliation to Trump’s recent tariffs, two government sources quoted by the Canadian Press insist the threat has nothing to do with U.S. President Donald Trump; and say it’s a one-off, specific action related to one dispute, and one Democratic senator in one state. They added that a long-term deal on softwood lumber would be the best way to prevent the dispute from escalating. “We hope we don’t have to act,” said one source, speaking on condition of anonymity in order to discuss matters not yet made public. “We hope this dispute can be resolved.”
However, suggesting that Trudeau’s escalation is nothing les than a retaliation to Trump, CP notes that the course of action being reviewed by the Canadian government “is similar to the process used in the U.S. that slapped a 20-per-cent duty on northern lumber. It involves a request to the Canada Border Services Agency to study illegal subsidies in Oregon, a process that would take several months.”
The government says it has zeroed in on nine programs in Oregon that assist businesses, primarily in lumber.
“They include: the Oregon Underproductive Forestland Tax Credit, the Oregon Forest Resource Trust, the Oregon Tree Farm Program, the Pacific Forest Trust, property tax exemptions for standing timber, a small winery tax exemption program and other tax credits.
“‘It’s a real thing. Our officials have already been looking at this,’ said one government official familiar with the plan. ‘Wyden has been a chief proponent for years of the baseless and unfounded claims against the Canadian softwood lumber industry.’
“Another official said there’s no intention of changing the low-drama, co-operative posture Trudeau has taken toward the White House: ‘This is not about the president. This is about the state… The strategy (with Trump) is still one of positive engagement… (But) we still have to respond to these issues as they come.’”
Previously, Trudeau’s Liberal government has said it would defend Canada’s lumber industry against what it calls an unfounded and unfair U.S. decision last month to impose the tariffs, and today’s action is merely the first step as Ottawa carries out its threat. It remains to be seen if Trump will agree to negotiate after today’s threat or will slap even more escalating sanctions on Canada. One thing is certain: the growing trade war threatens to make a mockery of the NAFTA rengotiation talks which are set to start this year.