With just days to go before Canada imposes retaliatory tariffs on billions of dollars’ worth of U.S. imports, Finance Minister Bill Morneau said Ottawa will provide help to some Canadian business owners and workers affected by the escalating trade war with the United States.
The minister made the comments after a meeting with his provincial and territorial counterparts, where Canada’s deteriorating trade relationship with the United States was the top issue on the agenda.
Mr. Morneau declined to provide specifics regarding the type of compensation under consideration or which industries would qualify, telling reporters that work is still under way.
“We understand Canadians want to see us supporting Canadian business, supporting Canadians, and I want you to know that you’ll be hearing more about that shortly,” he said. “I think you’ll be seeing efforts not only at the federal government level, but across the country.”
The comments come at a crucial juncture in Canada’s escalating trade battle with the United States: A raft of retaliatory tariffs against U.S. goods will take effect in less than a week in response to U.S. levies against steel and aluminum; the Finance Department is considering measures to block foreign steel diverted here; and members of Parliament are being warned of the dire threat White House protectionism represents to Canada’s auto sector.
One option for federal support would be for Crown corporations such as Export Development Canada and the Business Development Bank to provide additional help for Canadian businesses to expand their trading relationships with countries other than the United States, Quebec Finance Minister Carlos Leitao said.
Mr. Leitao noted that Quebec has already announced measures this month to support smaller firms in the steel and aluminum sectors. The provincial programs include loans and loan guarantees. “It’s much better to have a co-ordinated federal-provincial approach,” he said.
While Mr. Leitao said it is up to Ottawa to announce the details of any federal support, he speculated that temporary enhancements to the employment insurance program could be an option.
Ottawa has previously supported government programs for industries affected by trade disputes, such as last year’s decision to help lumber producers after the United States imposed new tariffs on softwood lumber imports. That package included incentives for exporters to expand in new markets. Ottawa also approved temporary enhancements to EI in 2016 for regions affected by the sharp downturn in the energy sector.
Canada is also looking at measures to block an expected wave of foreign steel diverted here as a result of the tariff wall the United States has erected against imports of the metal.
No decision has yet been made, but Peter Clark, a veteran trade consultant whose clients include business steel users in Canada, said he expects the federal cabinet will announce provisional safeguards in July “even though the government is hearing from people who warn it will hurt their companies.” These measures would be quotas for imports, with tariffs kicking in once the quota was met.
Mr. Clark said it would be unprecedented for Canada to set up barriers to foreign steel before allowing the Canadian International Trade Tribunal, the regulator that normally studies the matter, to first examine it thoroughly. Canada’s top sources of steel imports, aside from the United States, include China and Turkey.
He said import records do not show that foreign steel is already flooding into Canada. The 25-per-cent U.S. steel tariff was imposed on goods from China, Russia, Japan and Turkey in March.
Ottawa is being asked by steel producers in Canada to impose provisional duties on foreign steel and then refer the matter to the regulator for study.
Members of Parliament were warned by Canadian businesses Tuesday that the hefty import taxes the United States is threatening to impose on Canadian-made autos would seriously damage the economy.
“A 25-per-cent tariff on cars and parts would cause what we like to call a Carmageddon,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, told a Commons committee hearing.
“The economic stability of Ontario is at risk,” Mr. Volpe said, adding that such a measure would send at least seven U.S. states into recession.
The parliamentary hearing on the impact of already-enacted U.S. tariffs that Mr. Trump has imposed on Canadian steel and aluminum quickly shifted to the consequences of an even worse threat: the levies that the White House says it may put on foreign-made autos. This includes the Canadian auto sector, even though the cars shipped to the United States are made by U.S. auto makers in Canada.
John White, chief executive of the Canadian Automobile Dealers Association, told the Commons committee on international trade the auto tariff threatened by U.S. President Donald Trump is the ultimate threat to Canada.
“Let me say this plainly: Steel tariffs and retaliation measures, while significant and negative for the retail automotive market, are minimal compared to the tsunami-like economic downturn that would occur should we be subject to a 25-per-cent tariff, or even lose NAFTA,” he said.
He urged the Trudeau government to take any step necessary to prevent this.
Last week the TD Bank estimated that a threatened 10-per-cent U.S. import tax on car parts and a 25-per-cent levy on autos would cost Canada as much as 160,000 jobs – especially if the Canadian government took retaliatory action over this.
In mid-June, Mr. Trump, while heading to Singapore after the Group of Seven summit in Quebec, warned he might slap 25-per-cent tariffs on Canadian cars. He was responding to Prime Minister Justin Trudeau’s assertion that Canada would not be “pushed around.”
NAFTA talks are shelved and have been for some weeks after the United States insisted on a five-year expiry clause in a deal and Mr. Trudeau balked, calling that a deal-breaker. Also, Mexicans appear set to elect a new president July 1, and this could trigger changes in the bargaining team and positions put forward by Mexico.
Bill Curry
Steven Chase