Who knew Trump would go after Canada?

4/25/17
 
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from CNN Money,
4/23/17:

President Trump is picking his first trade fight with…Canada.

That’s not a typo. Trump spent his 2016 campaign lambasting China and Mexico for cheating on trade.

But Commerce Secretary Wilbur Ross announced a surprising 20% tariff on Canadian softwood lumber Monday night, along with individual tariffs on five specific Canadian lumber firms that ranged from 3% to 24%.

“This is really a slap in the face of Canada,” says Gary Clyde Hufbauer, a trade expert at the Peterson Institute for International Economics. “This is quite punishing to Canadian producers.”

Considering Trump’s blistering rhetoric against Mexico during and after the 2016 campaign, it’s a surprise he decided to go after Canada first.

When Canadian Prime Minister Justin Trudeau visited Trump In February, Trump said he only expected to be “tweaking” the US-Canada trade relationship, one of the biggest in the world.

“What this says to Canadians is ‘it’s going to be more than a tweak,'” Hufbauer adds.

At face value, the lumber tariffs may look like a head scratcher. But despite a relatively rosy relationship, the US and Canada have had a bitter dispute over lumber for decades.

What’s different now, is the timing.

Trump’s decision to rehash these battles comes just months before he plans to renegotiate NAFTA, the free trade agreement with Canada and Mexico, later this year.

Trade experts say all three sides were already challenged to renegotiate a new deal before the end of the year. Trump’s tariffs on Canada add a twist to the time line for NAFTA talks.

“It’s not clear this is a good move tactically if your goal is a quick renegotiation of NAFTA,” says Edward Alden a senior fellow at the Council on Foreign Relations. “This will tend to drive Canada more in alliance with Mexico.”

NAFTA implications aside, Trump isn’t the first US president to hit Canada with tariffs.

Canadian officials deny they provide firms with subsidies. The World Trade Organization sided with Canada in a dispute in 2004. The US and Canada had an agreement in place that expired in October, making the lumber dispute ripe for trade action.

Last year, Canada exported $5.6 billion of softwood lumber to the U.S. Some of that lumber goes towards building homes across America.

Lumber is a big deal for Canada. It alone accounts for 8% of Canada’s exports, according to Panjiva, a firm that tracks global trade data. The industry employs tens of thousands of workers.

On the dairy side, Canada has long imposed sky high tariffs on US dairy products to protect Canadian farmers. So US farmers can’t sell into the Canadian market, but Canadian farmers can sell into the US market.

From Yahoo, In response to US tariff, Canada eyes China market:

Canada’s share of the U.S. lumber market has ranged from 26 percent to 31.5 percent since 2006, when the countries signed an agreement, down from 34 percent, before that, said Duncan Davies, CEO of lumber producer Interfor Corp .

“For us, (U.S. tariffs are) a negative effect on our Canadian business, but the real loser in all of this is the U.S. homebuilder and U.S. consumer, who is looking for reasonably priced product … That’s why we think this is such a misguided effort,” Davies said.

A U.S. homebuilder group called the ruling “short-sighted.”

Canadian Trade Minister Francois-Philippe Champagne, in China on a week-long trip to boost sales of softwood lumber, said there had never been a better time to diversify exports.

“There is enormous potential,” he said by phone from Beijing, citing the large number of Chinese homebuilders and furniture makers who needed lumber.

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