In an effort to flex its negotiating arm, Canadian ambassador Dave MacNaughton said in the next week Canada will be proposing additional retaliatory tariffs, including agricultural products, in response to the ongoing use of the Section 232 steel and aluminum tariffs placed on Canadian goods.
MacNaughton said the Trump Administration imposed the Section 232 tariffs as a negotiating method for the renegotiating of the North American Free Trade Agreement. With NAFTA 2.0 – United States-Mexico-Canada Agreement (USMCA) – negotiating completed, MacNaughton said the need for the tariffs no longer exists.
MacNaughton discussed how even after President Trump has touted this is a “best trade deal” and clearly USMCA is an improvement on the status quo. He said in terms of agriculture the improvements to the Class 6 and 7 ultrafiltered milk, grain grading regime as well as dairy, poultry and egg access all would be loss for those in the United States if USMCA doesn’t advance.
Canada will not move forward in ratifying USMCA until Section 232 tariffs are removed. “So far we have not had, or been able to have meaningful negotiations,” on removing those “unjustified and illegal tariffs,” MacNaughton said.
Canada had promised a dollar-for-dollar retaliation. Initially it retaliated on steel and aluminum products, as well as bourbon and other consumer goods. However, MacNaughton said many items have been excluded from the list, which allows for new products to be added to the list. Currently he estimated $15 billion worth of tariffs are placed on Canadian steel and aluminum.
“The intent is not to escalate anything,” MacNaughton but to follow through on its promise to retaliate dollar-for-dollar.
He said the potential additions to the list include apples, pork, ethanol and even wine, as well as any number of both agricultural and non-agricultural products exported to Canada. Once an updated list is released, there would be a 45-day consultation on that list.
Time remains of the essence. Canada’s House of Commons adjourns June 15 ahead of its October elections. “If this is unresolved, if 232 tariffs are still in place, the discussion about our relationship with United States will be central to the campaign and it won’t be a positive conversation,” MacNaughton said. “The potential for rhetorical and other kinds of escalation are things I would rather avoid.”
When the stated purpose of the Section 232 tariffs under the guise of national security was to curb overproduction in countries such as China, MacNaughton said it’s difficult to understand why Canada has been targeted with 232 tariffs.
He noted the attitude of this administration is disruptive and “view disruption as being part of the style and everything has to be questioned.” He said it is a mystery to him how President Trump seeks international cooperation on Venezuela or Iran sanctions, but keep tariff sanctions in place.
“We face international threats that are unprecedented. If our two countries can’t get along, what does that say to the rest of the world?” MacNaughton questioned. “The longer this kind of irritation goes on, more stresses and strains it puts on that kind of relationship. It will be bad for both of our countries.”
Dale Moore, executive vice president at the American Farm Bureau Federation, said he’s “convinced and confident” at the end of the day USMCA will get done. The International Trade Commission will release a report by April 18 or 19 detailing the impact of USMCA. Moore does not expect dramatic increases in agricultural exports under USMCA, because those increases have already been seen in the last quarter of a decade.
He said the biggest lift is convincing House Speaker Nancy Pelosi (D., Calif.) to bring it up for a vote. In addition, there is a considerable amount of education for new members of Congress who have not been thru a trade debate.
Pelosi has said she’s waiting for Mexico to address labor changes it promised in USMCA negotiations, which MacNaughton said they believe Mexico will follow through on accomplishing soon.
Sen. Sherrod Brown (R., Ohio) and Ron Wyden (D., Ore.) are floating ideas to address Democrats’ concerns USMCA and build a consensus that could help get it through the Democratic-controlled House. The proposals include measures that would bar Mexican exporters from benefiting from the deal’s reduced tariffs if they violate workers’ collective-bargaining rights.
“I’m hopeful that we could get a trade agreement, but it has to be one that is real and that works,” Pelosi told reporters on April 4. On the matter of workers’ rights, she added that “exploiting workers in Mexico is not good for workers in the United States.”