Canada has placed tariffs valued at CAD 16.6 billion (USD 12.6 billion, EUR 10.8 billion) on American products as retaliation for a 25-percent tariff on steel and 10-percent tariff on aluminum the United States instituted earlier this year by U.S. President Donald Trump.
Canada’s tariffs took effect 1 July – Canada Day. While the new tariffs affect goods ranging from beer kegs to ball point pens, orange juice to candy to bourbon, they appear to have largely spared the seafood industry.
It’s an extraordinary situation for the two countries which traditionally tout their undefended border, close relationship, and are the world’s second-largest trading block.
More than USD 1.5 billion (EUR 1.3 billion) in goods and more than 300,000 people cross the U.S. Canada border every day. The value of trade crossing the Ambassador Bridge between Windsor, Ontario and Detroit, Michigan is equal to all of Japan's exports to the U.S. Canada is a bigger market for U.S. goods than the 27 countries of the European Community. For example, 4,000 shipments of ingredients for Campbell's Soup products cross from the US into Canada each day and 3,500 travel from Canada into the U.S.
Since introduction of the North American Free Trade Agreement in 1985, there has been a 350 percent rise in trade between the U.S. and Canada. Canada is one of the top five investor nations in the U.S. and is America’s primary energy source (oil, natural gas, and electricity), while Saudi Arabia is number three.
In June, President Donald Trump, citing “national security interests” revoked a tariff exemption on Canadian steel and aluminum shipped to the U.S. Trump’s statements that Canada and Canadians, who have fought side-by-side with American forces in two world wars, Korea and Afghanistan, couldn’t be trusted and were a threat to America’s security was termed “insulting and unacceptable” by Canadian Prime Minister Justin Trudeau.
Trump’s tariffs represent a significant blow to Canadian steel manufacturers, since 45 percent of their production goes to U.S.-based customers, primarily for automotive, construction, and general manufacturing uses. This may be a negotiating tactic for rewriting NAFTA, but moved from strictly business to the personal when the president tweeted that Trudeau was “weak” and “dishonest.” Chief economic adviser Larry Kudlow's characterization of the prime minister as “sophomoric” and a backstabber united Canadians, including opposition politicians.
“Canadians are polite, we’re reasonable, but we also will not be pushed around," Trudeau said in announcing the tariffs. He said unleashing retaliatory measures “is not something I relish doing” but will do so because “I will always protect Canadian workers and Canadian interests.”
The list of targeted items appears to have been curated to cause the least inconvenience to Canadian business and consumers and the greatest amount of pressure on U.S. politicians. For example, a tariff on bourbon targets Kentucky, home state of U.S. Senate Majority Leader Mitch McConnell. Speaker of the House Paul Ryan’s home state of Wisconsin is targeted through tariffs on cucumbers and gherkins, as well as yogurt. Orange juice, chocolate and other “sugar confectionary” are listed because they come from Pennsylvania and Florida, which are seen as states with high political importance.
Secondary lists are in development to match further action by the administration. Ottawa is also making CAD 2 billion (USD 1.5 billion, EUR 1.3 billion) in financial assistance available to Canadian steel and aluminum producers.
For Maine, one of the states with the most direct trade relative to GDP, the list of products for the first round of tariffs was a relief. In total, Maine’s tariff exposure amounts to USD 67 million (EUR 57.5 million), or less than six percent of the state’s total exports to Canada. Boats, greeting cards, salad dressing and prepared chicken are on the list, but seafood (including lobster) and lumber are not. U.S. maple syrup is on the list, but it is an almost inconsequential tariff, since 72 percent of the world’s maple syrup comes from Quebec.
Maine was mostly spared because of vast Canadian business interests in the state and, as MacLean’s magazine said, Maine has “minimal sway in presidential elections.”