Canada Retaliates With Tariffs on $12.8 Billion of U.S. Goods

(Bloomberg) -- Prime Minister Justin Trudeau retaliated swiftly against President Donald Trump’s metals tariffs by imposing his own levies on as much as C$16.6 billion ($12.8 billion) of U.S. imports in what Canada calls its strongest trade action since the Second World War.

Trudeau invoked decades of battles fought alongside the U.S. and defending North American airspace as proof the U.S. tariffs based on a national security investigation are “unacceptable” and “punitive.” The Canadian tariffs of 25 percent on steel and 10 percent on aluminum will aim to match U.S. penalties on a dollar-for-dollar basis, based on export values, according to Foreign Affairs Minister Chrystia Freeland.

“We have to believe that at some point their common sense will prevail,” Trudeau told reporters in Ottawa Thursday. “But we see no sign of that in this action today by the U.S. administration.”

The tariffs take effect on July 1 -- Canada Day -- and will last until the U.S. ends its trade action. They will also cover a range of imports such as yogurt, pizza, whiskeys and tablecloths, in addition to aluminum and steel products. Canada will challenge the U.S. tariffs at the World Trade Organization and through a Nafta panel. “This is the strongest trade action Canada has taken in the post-war era,” Freeland said.

Trudeau said the Trump move will hurt U.S. interests. “The American administration has made a decision today that we deplore,” he said. “They don’t quite understand this is going to harm Americans.”

Hours earlier, U.S. Commerce Secretary Wilbur Ross announced duties on steel and aluminum imports from the European Union, Mexico and Canada, ending temporary exemptions. The European Union also took immediate steps to retaliate and Mexico vowed to impose duties on everything from U.S. flat steel to cheese.

The U.S. has a surplus in steel trade with Canada, which buys more American steel than any other nation, Trudeau said.

“It’s a surprising reversal of fair trade between our two nations that had existed for the better part of a generation,” said Joseph Galimberti, president of the Canadian Steel Producers Association. “Canada has long been an ally of the United states in addressing global over-capacity.”

‘Didn’t Happen’

Canada’s steel industry employs 23,000 workers and added C$4.2 billion annually to gross domestic product last year, according to the Finance Department. The country’s major producers are ArcelorMittal Dofasco, owned by Luxembourg-based ArcelorMittal; Essar Steel Algoma Inc., owned by privately-held Essar Global Fund Ltd.; and Stelco Holdings Inc., majority-owned by New York-based Bedrock Industries Inc.

London-based Rio Tinto Group ships more than 1.4 million metric tons of aluminum to the U.S. annually from Canada. The industry accounts for about 10,500 workers and contributed C$4.7 billion to GDP.

The trade fight is ratcheting up a week before Canada hosts Group of Seven meetings in Quebec. Trudeau said a meeting with Trump to potentially seal a Nafta deal was scrapped after Vice President Mike Pence called to demand it included a sunset clause that Canada has already rejected.

“I had to highlight that there was no possibility of any Canadian prime minister signing a Nafta deal that included a five-year sunset clause, and obviously the visit didn’t happen.”

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