Canada hits back at US with tariffs on metals, bourbon and orange juice

Canadian Prime Minister Justin Trudeau at the conclusion of the G7 summit in Quebec, June 9, 2018. Canada has retaliated with tariffs on summertime essentials after the US imposed steel and aluminium tariffs. PHOTO: AFP

OTTAWA (AFP) - Canada hit back at the United States on Friday (June 29) with retaliatory tariffs on American summer-time essentials including Florida orange juice, ketchup and Kentucky bourbon in its opening salvo in a trade war with President Donald Trump.

As temperatures and tensions increase, the measures targeting Can$16.6 billion (S$17.21 billion) in US steel, aluminium and consumer goods will take effect on Sunday, when Canadians celebrate a national holiday and just days before Americans celebrate Independence Day amid a heatwave expected in both countries.

The tit-for-tat duties are a response to the punishing US steel and aluminium tariffs imposed at the start of June.

Ottawa also unveiled Can$2 billion (US$1.5 billion) in aid for the two sectors and their 33,500 workers.

Ottawa "had no choice but to announce reciprocal countermeasures to the steel and aluminium tariffs that the United States imposed on June 1, 2018", Prime Minister Justin Trudeau told Mr Trump in a call on Friday, according to a statement from his office.

"The two leaders agreed to stay in close touch on a way forward," it said.

Canadian Foreign Minister Chrystia Freeland announced the tariffs at a steel facility in Hamilton, Ontario, where she was flanked by brawny workers in yellow hardhats.

"We will not escalate and we will not back down," she said, while noting that this trade action was the strongest Ottawa has taken since World War II.

But she said the move was made with "regret" and "very much in sorrow, not in anger" against a close ally.

The list of more than 250 US goods subject to Canadian duties - including Florida juice, Wisconsin toilet paper and North Carolina gherkins, which are labour intensive to produce - aim to pressure Trump supporters key states in November's US mid-term elections.

The penalties will add 25 per cent to the cost of US steel, and 10 per cent to aluminium and consumer goods.

Canada and Mexico initially were exempted from the US metals tariffs - as was the European Union - but Mr Trump allowed the duties to take effect on June 1 after talks stalled to revamp the 1994 trilateral North American Free Trade Agreement (Nafta).

After the EU unveiled similar retaliatory tariffs, US Trade Representative Robert Lighthizer earlier this week lashed out calling them groundless and illegal.

"These retaliatory tariffs underscore the complete hypocrisy that governs so much of the global trading system," he said in a statement, and "do great damage to the multilateral trading system".

Business executives warned lawmakers this week that escalation into an all-out trade war would be devastating to the Canadian economy, which sends about 75 per cent of its exports to the United States.

If Mr Trump steps up his attacks on Canada's economy and imposes a 25 per cent tariff on automobiles as threatened, it would lead to "carmageddon", Mr Flavio Volpe, president of the Automotive Parts Manufacturers Association, told a Commons committee hearing on Tuesday.

Canadians, however, are overwhelmingly in favour of the retaliation.

In Ottawa, officials and others have declined an invitation to the US ambassador's annual July 4th bash.

"I've politely declined because I'm not happy with the direction of the American government and their constant attacks on our country," Ottawa Mayor Jim Watson told public broadcaster CBC.

Canadian patriotism, meanwhile, has flourished under hashtags like #BoycottUSA, #BuyCanadian and #VacationCanada that urge people not to buy American goods and travel packages.

Canada and the US are among the world's two largest trading partners with an estimated US$673.9 billion (S$918.46 billion) worth of goods and services exchanged in 2017, with the US scoring a small surplus (US$8.4 billion), according to the US government data.

The United States also is the top destination for Canadian vacationers, who made 42 million trips to the US in 2017.

But relations between these two neighbours have plunged to their lowest in decades, reaching new depths at the recent Group of Seven summit when Mr Trump abruptly rejected the joint statement and insulted Mr Trudeau.

On the campaign trail this week, Mr Trump continued his attacks on Canadian dairy, wheat and duty-free customs allowances for Canadians returning home, saying they were scuffing up brand new shoes in order to sneak them in.

US Commerce Secretary Wilbur Ross last week defended the Trump administration's tariffs before Congress, but admitted that Canada's steel industry was "not being accused of directly or individually being a security threat".

Ms Freeland took note, saying this was "self-evident".

She also repeated that Mr Trump's decision to invoke national security to justify the US tariffs on steel and aluminium imports was "insulting" to Canadian veterans who had stood by their US allies in conflicts dating back to World War I.

Canadian steel is used in American tanks, and Canadian aluminium is used in American planes.

The United States has a US$2 billion trade surplus on iron and steel products, and Canada buys more American steel than any other country, accounting for 50 per cent of US exports, Ms Freeland said.

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