Donald Trump’s assertion that a trade war will end in an easy win for the USA is being tested from all quarters. Rather than restricting US tariffs to China which has long been accused of both unfair trade practices and artificially keeping the Yuan low to give its products a further advantage in export markets, Trump’s approach has been to target allies as well. The justification for his tariffs on steel and aluminium products was that he was protecting US national security; this claim has rung hollow around the world as the affected nations have brought up their own tariffs in response to US measures.
The latest ally to respond to US tariffs has been its big neighbour to the north, Canada. With effect from the start of July, Canada has been levying its own tariffs on US imports. The retaliatory tariffs match a 25% levy on various US metal products and are extended to some 250 other US imports including items such as beer kegs, whiskey and orange juice. The estimated value of the tariffs (which are paid by Canadian citizens if purchasing US imports) are worth C$16.6 billion which was the estimated value of Canadian exports of metal products to the USA in 2017 which will be affected by the US tariffs.
The items selected for tariffs by Canada are intended to have a political influence in the USA where many are uneasy about the President’s aggressive trade practices – particularly against long-standing, close allies. Many nations affected by the US moves have claimed that they are illegal, unjustified and counter-productive and have already complained formally to the World Trade Organisation.
Canada has said that C$2 billion was available to support steel and aluminium businesses hurt by the US moves. With the Trump administration contemplating tariffs on EU car imports, the perturbations to global trade may get a lot worse before common sense and the rule of law can prevail.