U.S. President Donald Trump is firing the first shot in what could amount to a global trade war, announcing plans to slap hefty tariffs on foreign imports of steel and aluminum as a means of protecting American jobs.
The Canadian government was quick to threaten retaliation against the United States if steel and aluminum from Canada are included in the administration's trade action.
Mr. Trump said on Thursday he intends to levy 25-per-cent tariffs on steel imports and 10-per-cent on aluminum imports, sending U.S. stock markets tumbling over fears of global retaliation and higher inflation.
"We're going to build our steel industry back and our aluminum industry back," he said of the measures, which his administration has defended as necessary for national security, including the building of ships and tanks.
These measures – which Mr. Trump said will not be formally unveiled until next week – could also exacerbate the already-strained renegotiation of the North American free-trade agreement. In NAFTA talks, Canada and Mexico are fighting a series of protectionist demands from the Trump administration. The U.S. move threatens to overshadow those talks in Mexico City, which are in their seventh round since the United States notified its partners last year that it wants to renegotiate the deal.
Despite the Canadian protests, The New York Times reported on Thursday that no countries will be exempted from the tariffs, made under the obscure national-security provisions of the 1962 Trade Expansion Act. That's different from 2002, when Canadian imports were exempted from temporary steel tariffs of 8 per cent to 30 per cent imposed by president George W. Bush's administration.
Within hours of Mr. Trump's announcement, Canadian Foreign Affairs Minister Chrystia Freeland issued a public warning to the United States that Ottawa would strike back if Mr. Trump slaps tariffs on Canadian-made steel and aluminum.
Ms. Freeland said Canada believes the United States has no justification to include its neighbour and military partner in a crackdown on foreign metal imports.
"As a key NORAD and NATO ally, and as the No.1 customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable," Ms. Freeland said.
"It is entirely inappropriate to view any trade with Canada as a national-security threat to the United States. We will always stand up for Canadian workers and Canadian businesses. Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers."
U.S. tariffs could damage Canada's steel and aluminum industry, directly affecting 22,000 jobs in steel and 10,000 in aluminum. Producers will also have to cope with what trade experts warn will be a wave of foreign imports diverted away from the United States by the American tariffs.
Ms. Freeland did not elaborate on what form the Canadian response might take.
International trade lawyer Lawrence Herman said it could include imposing surcharges or restrictions on American imports.
The Trump measures could spark a global trade war, he said. "This is the first unilateral, global trade action by Trump affecting key industrial products. Other governments besides Canada will certainly respond. This will have worldwide repercussions, with potentially damaging effects on the world trading order generally."
The 28-member European Union quickly vowed to impose countermeasures on the United States.
Mr. Trump made his announcement after the U.S. Commerce Department recommended tariffs to protect two key U.S. manufacturing industries that have been hit hard by cheap imports from China.
Canadian officials could not say on Thursday whether Canada has been exempted, but one senior official said they believe this country, along with Britain and Australia, have a good case to be excluded because they form part of the defence industrial base of the United States.
Ottawa and executives from the steel and aluminum industries pushed hard for an exemption for Canada, given that U.S. tariffs are being imposed for reasons of national security and that Canada is a close U.S. ally.
Canada is the largest supplier of both steel and aluminum to the United States. Shipments from Canadian mills account for roughly 6 per cent of the U.S. steel market. Aluminum producers in Canada ship more than 2.3 million tonnes to U.S. customers annually.
Industry and union officials on both sides of the border on Thursday said that they were not sure if Canada had won an exemption that Canadian officials have been urging for months.
The United Steelworkers, which represents workers at mills on both sides of the Canada-U.S. border, will fight to get Canada excluded from the trade actions, Leo Gerard, the Canadian-born president of the union said in an interview from Pittsburgh.
"Canada's not a problem," Mr. Gerard said. "It's not a problem factually; it's not a problem ideologically."
The steel and aluminum action also comes amid a series of other trade disputes between Canada and the United States – on softwood lumber and government financial support for airplane maker Bombardier Inc. – that have caused Canada to make a wide-ranging complaint to the World Trade Organization about U.S. trade practices and remedies.
The tariffs are expected to increase the prices in North America of motor vehicles, appliances, construction equipment and military hardware.
Some steel-industry officials fear that dumping of cheap foreign steel in Canada will increase once the U.S. tariff wall is constructed.
"Canada has to make a similar announcement or imports will be diverted here," said Barry Zekelman, chief executive officer of Zekelman Industries, which owns steel-tube producers JMC and Atlas Tube.
Canada's argument for exemption largely hinges on how integrated the U.S. and Canadian steel industries are – saying that hitting Canada with tariffs would hurt the United States – as well as how integral Canadian steel is to the U.S. military-industrial complex.
"The trickle effect on parts and cars that cross the border means we all get punished with higher costs," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association of Canada.
One auto industry source said the White House has privately indicated it does not want to give Canada an exemption from the tariffs.
A steel-industry source said the White House had not told the industry definitively whether it would grant exemptions to any country, but appeared to be leaning toward not granting any.
In fact, the source said, the industry did not even know the tariff announcement was coming until Mr. Trump made it. Industry members received invitations to Mr. Trump's event late on Wednesday. By Thursday morning, they understood the event to be purely a roundtable discussion with no announcement. It was not until Mr. Trump revealed the tariffs near the end of the event that the industry knew about them, the source said.
With reports from Robert Fife in Ottawaand the Associated Press.