Not if, but when: Trade lawyer says Canada will be exempted from U.S. tariffs
It’s a matter of time before U.S. President Donald Trump wakes up to the reality that Canada should not be slapped with hefty tariffs on the steel and aluminum it ships south of the border. But the opening salvos of a trade war may be fired before that happens.
That’s the outlook of a prominent international trade and customs lawyer who specializes in Canada-U.S. relations. Daniel Ujczo told CTV’s Your Morning that he expects cooler heads will eventually prevail, especially if upward pressure on commodity prices cause job losses, and Canada starts to snipe at politically sensitive U.S. goods.
“It’s just going to be a question of if, is it going to be days, weeks or months until we see Canada exempted from this tariff,” Ujczo said on Tuesday.
A native of Youngstown, Ohio, a once-mighty Midwestern steel town, Ujczo is confident most workers there would agree that Trump is overplaying Canada’s role in causing depressed metals prices.
“I can tell you those people on the ground weren’t thinking about Canada when they were complaining about foreign steel,” Ujczo said. “We’ve heard more about Canada in the last week in the United States then we have over the last 25 years that I have been doing Canada-U.S. (relations).”
Most analysts agree that U.S. steel and aluminum has been hurt, mainly by overproduction in China. Weaker global prices for both metals have made it difficult for many U.S. producers to survive.
However, higher prices could take a significant toll on users of steel and aluminum. General Motors and Ford could each take a US$1 billion profit hit if the tariffs are put in place, according to analysts at Goldman Sachs. Ujczo said layoffs could be in cards as companies adjust to changing prices.
Trump announced the tariffs last week, telling a group of U.S. metal industry executives that imported steel will be slapped with a 25 per cent tariff and foreign aluminum will face a 10 per cent tariff. Canada is the top supplier of both to the U.S., with $15 billion a year in combined sales.
Prime Minister Justin Trudeau spoke with Trump by phone on Monday. The talks, which are said to have been productive, come on the heels of a suggestion by the U.S. president that the tariffs may be used as leverage against Canada and Mexico at the NAFTA negotiating table.
“We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A.,” Trump wrote in a pair of tweets on Monday. “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must treat our farmers much better.”
Ujczo, who recently returned from the latest round of NAFTA talks in Mexico City, said he saw “slow and steady progress” underway. He remains confident a trilateral deal will eventually be inked.
He sees Trump’s recent characterization of Canada as a “very smooth” negotiator that has “taken advantage” of the U.S. as evidence that Canada’s resolve on certain key trade files is being taken seriously by their U.S. counterparts.
“The U.S. has finally woken up to, ‘Hey, they got us on that deal,’” Ujczo said. “I think you are hearing some of that smooth operator (commentary). We’ve know that in the U.S. now for a while.”
If Trump presses ahead with plans to levy tariffs on Canadian steel and aluminum, he expects Ottawa will be quick to retaliate against politically sensitive targets in order to encourage top U.S. officials to put pressure on the White House.
“It will be against Harley Davidson in Wisconsin, where Speaker Paul Ryan is from. It will be things like Kentucky bourbon where Senator Mitch McConnell is from,” Ujczo said. “Anywhere there is an important political figure, that’s where you will see retaliation.”
Canadian dairy could be in Trump’s crosshairs, again
Ian Lee, a professor at Carleton University’s Sprott School of Business, said Canada is in no position to play the victim when it comes to cross-border tariffs. He believes Trump’s latest reference to the treatment of U.S. farmers suggests he will resume his attacks on Canada’s supply-managed dairy system.
“I don’t agree with anything that President Trump says, generally speaking, about trade,” he told CTV News Channel on Tuesday. “At the same time, on this file, on this one file, we’re doing the very thing that we are complaining that the Americans are doing, which is using tariffs. Our worst, most egregious, example of that is the 270 per cent tariff on American dairy products coming into Canada.”
He said he would not be surprised if Trump goes after all of Canada’s federally-protected industries, from financial services to airlines, before trade relations are settled between the two nations.
“I followed Trump all through the election, and I saw where he was going. He was saying, ‘I’m going to use all the powers and all the levers of the state, of the government, to force other countries that we think are cheating to open up,’” Lee said. “I’m talking airlines. I’m talking banking. I’m talking dairy. I’m talking telecom.”
Trudeau’s Washington charm offensive to be put to the test
Rideau Potomac Strategy Group President Eric Miller expects Canada’s lobbying efforts in the U.S. capitol will pay off when it comes to skirting tariffs on steel and aluminum.
“He (Trump) has a willingness and track record for following through on his threats. I also see a very significant possibility in Canada getting an exemption,” he told CTV News Channel. “There is a huge ground-swell in Washington, and I think this is very much a representation of the payoff of the campaign the Trudeau government has launched to generate support in the U.S.”
Miller is also confident that Canada is holding its own at the NAFTA negotiating table.
“Canada has tried during the NAFTA negotiations to the tack of being calm and rational and moving in the right direction, while at the same time seeking to keep the game going.”