Canada considers retaliation 'sweet spot' as U.S. moves to impose metal tariffs

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Canada is looking for a “sweet spot” when it comes to retaliating against the U.S. decision to slap punishing tariffs on steel and aluminum imports, according to a senior government source.

Secretary of Commerce Wilbur Ross announced Thursday the U.S. is following through with its threat to impose tariffs of 25 per cent on imported steel and 10 per cent on imported aluminum, citing national security interests.

U.S. President Donald Trump had granted exemptions to his North American Free Trade Agreement allies and the European Union, but those all were set to expire June 1.

During a call with reporters Thursday morning, Ross said Canada’s and Mexico’s exemptions were linked to the progress of the NAFTA negotiations, which “are taking longer than we had hoped.”

The senior source, who has direct knowledge of the talks, said the Canada-U.S. committee met Thursday morning to discuss an appropriate response, describing it as “finding a sweet spot.”

They said the challenge is coming up with a response that makes sense and allows Canada to be a “credible country.”

Ontario Premier Kathleen Wynne called Trump a “bully” and urged the federal government to push back. 

“We need to hit Trump where it hurts — in his wallet,” she said on the campaign trail Thursday. ​”This short-sighted decision is an attack on Ontario’s steel industry and its workers. It is not the action of a friend, an ally or economic partner.” 

She also called on her provincial political rivals to come together to speak with one voice.

Donald Trump is a bully. The only way to deal with a bully is stand up and push back. And that’s exactly what we need to do. Ontario is urging a swift and sharp response. We need to hit Trump where it hurts – in his wallet.

mdash;@Kathleen_Wynne

So far, no members of Canada’s cabinet have offered a concrete plan of action. Foreign Affairs Minister Chrystia Freeland has previously said Canada will defend its industries and jobs.

Prime Minister Justin Trudeau is scheduled to address reporters on the new tariffs at about 1:30 p.m. ET.

About 90 per cent of Canada’s steel exports head to the United States, according to the Canadian Steel Producers Association. Steel is produced in five provinces, but the industry is heavily concentrated in Ontario.

Mexico, EU to retaliate 

Mexico swiftly responded with tariffs of its own on pork bellies, grapes, apples and flat steel, The Associated Press reported.

The EU also announced it would trigger a dispute settlement case at the WTO and impose “rebalancing measures.”

“Today is a bad day for world trade. We did everything to avoid this outcome,” said EU Commissioner for Trade Cecilia Malmström.

“The U.S. has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU. This is not the way we do business.”

Ross tried to deflect suggestions the tariffs would damage ongoing NAFTA talks and the upcoming G7 meetings in Quebec.

“If any of these parties does retaliate, that does not mean that there cannot be continuing negotiations,” Ross said.

“They’re not mutually exclusive behaviours.”

He did allow some leeway, saying the U.S. could be flexible. 

“We continue to be quite willing and indeed eager to have further discussions,” Ross said. 

Security reasoning questioned 

Conservative MP Erin O’Toole said Canada should be treated differently than the EU when it comes to security. 

Canada’s procurement minister cast doubt on the U.S.’s national security justification.

A welder fabricates a steel structure at an iron works facility in Ottawa, Ontario, Monday, March 5, 2018. The U.S. will slap tariffs on Canadian, Mexican and European Union steel and aluminum as of midnight June 1. (Sean Kilpatrick/Canadian Press)

“It is very difficult to fathom that there would be a security risk imposed by Canada on the United States,” said Public Services and Procurement Minister Carla Qualtrough while attending Cansec, Canada’s largest annual arms show, in Ottawa.

She said the federal government has “contingency plans” in place to absorb the impact of potential U.S. tariffs on steel and aluminum on defence projects. 

Multi-billion dollar programs to buy new fighter jets and warships are all heavily dependent on the price of steel. 

“We prepare for this kind of thing,” said the Delta MP. “There is money set aside, whether it be for tariffs or for interest rate fluctuations, so we can proceed with our defence procurement should there be additional costs associated because of tariffs or other unexpected circumstances.”

‘Not the action of a friend’

Trudeau called Wynne, Quebec Premier Philippe Couillard and Saskatchewan Premier Scott Moe, all in regions with large steel and aluminum sectors, on Wednesday to talk about the upcoming decision.

U.S. Commerce Secretary Wilbur Ross said Canada’s and Mexico’s steel exemptions were linked to the progress of the NAFTA negotiations, which ‘are taking longer than we had hoped.’ (Vincent Yu/Associated Press)

The Prime Minister’s Office said they “all agreed to continue to defend the Canadian steel and aluminum industry from unwarranted tariffs and to stand up for the best interests of all Canadian workers and businesses.”

“It’s a bad decision for the Americans. They’re increasing manufacturing and defence industry costs,” he said in French.

Finance Minister Bill Morneau announced late Wednesday that the government would bolster its measures to prevent foreign steel and aluminum from being dumped into the North American market, but it appears to have done little to prevent the U.S.’s punitive duties

Canada’s attempt to thwart the tariffs came in concert with its European allies, who were also trying to stop the U.S.