Will Trump Tariffs Incite A Trade War With Canada?

Peter Muggeridge | March 2nd, 2018
U.S. President Donald Trump

President Donald Trump at a meeting with leaders of the U.S. steel industry at the White House on March 1, 2018 to announce plans to impose tariffs on steel and aluminum imports. (Photo by Win McNamee/Getty Images)

When U.S. President Donald Trump dropped a bombshell Thursday saying that he would begin imposing tariffs on steel and aluminum imports, he touched off fears of an impending global trade war that would affect his country’s largest trading partner – Canada.

Saying that “trade wars are good, and easy to win,” Trump said the tariffs could be imposed under Section 232 of a national security provision that  allows the President to ““adjust the imports of an article and its derivatives” if the Commerce Department deems it “threaten to impair” U.S. national security.

The announced move will not only increase tensions between the U.S. and it global partners but, if they apply to Canada, have a punishing affect on our own steel industry’s ability to sell in the U.S.

That’s because Canada is the largest source of steel and aluminum imports to the U.S., comprising 16 per cent of all imports, ahead of Brazil (13 per cent) and South Korea (10 per cent).

Reaction to the Trump tariffs here was immediate and harsh.

Canadian Foreign Affairs Minister Chrystia Freeland believes the tariffs will hurt both countries steel industries and warned Canada could hit back with similar moves.

“As a key NORAD and NATO ally, and as the No.1 customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” said Freeland. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

The increasingly protectionist attitudes in the U.S. come at a bad time, as Canadian negotiators are already struggling to save the North American Free Trade Agreement (NAFTA).

There’s still a slim hope that Canada, as America’s closest ally and trading partner, might be exempt from the tariffs. “Canada should just be excluded – period. We have an integrated economy. And if it gets undone, America will pay a heavy price,” says Leo Gerard, International President of United Steelworkers. Ken Neumann, director of United Steelworkers Canada, went further, saying the move could “decimate” the Canadian industry.

The news sent stock markets reeling around the world – the Dow closed the day 420 points lower.

Global Outrage

Outside of Canada, there was a great deal of negative reaction to the Trump tariff announcement, both in the U.S. and around the world:

  • A Chinese trade industry called it a “stupid trade protection measure.”
  • A Wall Street Journal editorial called the move Trump’s “biggest policy blunder” saying the tariff would “punish American workers, invite retaliation that will harm exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms.”
  • European Commission President Jean-Claude Juncker: “We will not sit idly while our industry is hit with unfair measures,” he said. “The EU will react firmly and commensurately to defend our interests.”
  • Chinese foreign ministry spokesperson Hua Chunying: “China urges the US to exercise self-restraint, not to implement trade protection tools.”
  • Japanese Trade and Industry Minister Hiroshige Seko: “I don’t think exports of steel and aluminum from Japan, which is a U.S. ally, damages U.S. national security in any way, and we would like to explain that to the U.S.”
  • Australian trade minister Steven Ciobo said: “The imposition of a tariff like this will do nothing other than distort trade and ultimately, we believe, will lead to a loss of jobs.”