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The federal government is bracing for a long trade dispute with the U.S. government on steel and aluminum, offering up to $2-billion in financial aid to companies affected by recent U.S. tariffs on their exports.

The aid package – more than twice the value of last year’s plan to help the softwood lumber industry – was announced at the same time the government confirmed plans to impose $16.6-billion in “dollar-for-dollar” countermeasures on U.S. goods.

“We will not escalate, but equally, we will not back down,” Foreign Affairs Minister Chrystia Freeland said at a news conference in Hamilton on Friday.

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U.S. President Donald Trump has taken shots at Canada in recent weeks, fueling fears that his administration will soon impose tariffs of 25 per cent on Canadian-made cars and car parts.

Ms. Freeland said such a move would be “absolutely absurd.” Speaking in front of a group of Stelco workers, she said she is confident common sense will prevail and that an “intensive phase” of talks in the renegotiation of the North-American free-trade agreement (NAFTA) will start quickly after Sunday’s election in Mexico.

“We’re ready, really, for pretty much everything,” she said, pointing out that Canadian-U.S. relations will likely have further “moments of drama.”

Last month, the United States government announced tariffs of 25 per cent on Canadian steel and 10 per cent on Canadian aluminum effective June 1 after the Trump administration removed an exemption sparing Canada, along with the European Union, from global measures announced earlier this year. U.S. Commerce Secretary Wilbur Ross blamed a lack of progress in NAFTA talks with Canada and Mexico for the move.

On Friday, the federal government announced reciprocal tariffs on steel and aluminum imports, as well as duties on a wide range of products, including playing cards, ballpoint pens and sleeping bags. Consumer items removed from the initial list of potential targets included prepared mustard, beer kegs and fruit purées.

Jean Simard, CEO of the Aluminium Association of Canada, said his organization asked the government to pull from the list as many products that cross the border multiple times as it could, explaining that it can only be harmful if the same product is dinged by tariffs on both sides. While the government endeavoured to remove many such items, some remain, he said.

His lingering concern is when the issue will finally be put to rest.

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“How long will this last? And also, what kind of concession will it take to get this out of the picture?” Mr. Simard asked.

Mr. Simard added he is concerned about his partners in the United States, where companies have floated the possibility of layoffs if the trade situation worsens.

“If things go bad for them, they go bad for us,” he said. “My concern, as an industry player that exports 90 per cent of what it produces to the U.S., is viewing the progressive destruction of my value chains in the U.S.”

Ottawa has proposed tools to offer financial aid to the companies affected by the tariffs. Export Development Canada and the Business Development Bank of Canada are offering up to $1.7-billion in loans and services to the aluminum and steel sectors, including small and medium-sized businesses.

The Strategic Innovation Fund, which is run by the department of Innovation, will offer up to $250-million in new funding to companies looking to invest in new technologies and workforce training. Global Affairs Canada will spend $50-million over five years to help Canadian firms diversify their exports.

“Working in partnership with industry and business associations, we will provide capacity support to assist Canadian companies [to] tap into the new markets now uniquely open to them in Europe, Asia and around the world,” said International Trade Minister François-Philippe Champagne.

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In addition, Employment and Social Development Canada will spend $25-million over four years to extend work-sharing agreements that help employers retain workers and avoid layoffs, with another $50-million going to help affected workers to obtain training and find jobs.

The package is similar to last year’s support for the softwood lumber sector, which was worth a combined $867-million. That support has gone largely unused, as booming demand for lumber has overcome the higher costs of U.S.-imposed tariffs for that sector.

The United Steelworkers said the government should be ready for a more ambitious financial package, including more direct help for affected workers if the dispute lasts longer. In particular, the union said employment insurance rules would need to be modified to make it easier for affected workers to qualify and receive benefits for a longer period.

“The counter-tariff and community support measures announced today by the federal government is a good first step that will need to be expanded if the trade dispute continues beyond the short-term,” Ken Neumann, United Steelworkers national director, said in a statement.

Meanwhile, asked about reports that Stephen Harper will meet senior U.S. officials in Washington next week, Ms. Freeland said the former prime minister did a good job defending Canada on U.S. television earlier this month and that she wished him well in all his endeavours.

With a report from Victoria Gibson

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