As trade negotiations with the United States enter the eleventh hour, Canada is in a scramble to avert hefty tariffs targeting billions of dollars of its exports. Absent a last-minute deal, US President Donald Trump’s administration will impose a 50-percent duty beginning on Wednesday on a broad range of Canadian exports, including electronics, industrial machinery, furniture, dairy products and wine. Some $20.2bn worth of goods are in the firing line, accounting for about 5 percent of US imports from Canada, according to the Center for Strategic and International Studies.
Trump has justified the tariffs as a response to what he deems Ottawa’s discriminatory treatment of US automobiles, dairy products and alcoholic drinks. While Trump has aimed a slew of punitive trade measures at Canada since reentering the White House, the latest tariffs – invoked under the first-ever application of Section 338 of the Tariff Act of 1930 – are notable for applying to goods that qualify for duty-free treatment under the United States-Mexico-Canada Agreement. Despite Trump’s tariffs on sectors such as autos and steel, exemptions in the three-way deal, which was ratified during the first Trump administration, have allowed an estimated 85 percent of US-Canadian trade to remain tariff-free.
On Monday, Canadian Prime Minister Mark Carney, who has said he expects to speak to Trump before the Wednesday deadline, described the negotiations as “delicate” and “intense”. Earlier this month, Carney went as far as to acknowledge that the talks had been “nasty”. Ottawa’s efforts to reach a breakthrough are complicated by the need to bring the country’s provinces on board with any deal.
Among the trade policies that have invoked Trump’s ire are provincial-level bans on the sale of US alcoholic beverages. Excepting Alberta and Saskatchewan, each of Canada’s 10 provinces has blocked US alcohol sales since early last year in retaliation for Trump’s trade salvoes. While Ontario Premier Doug Ford and some other provincial leaders have indicated that they are open to lifting the restrictions if Trump backs down from his tariffs, others have been noncommittal.
Meanwhile, Quebec Premier Christine Frechette has described Canada’s supply management system, which sets production and import quotas for dairy, eggs and poultry, as a “non-negotiable” issue for her province. There is no question that Canada has far more to lose than the US in the talks. Some 70 percent of Canadian exports go to the US, an economy that is approximately 13 times larger than that of its northern neighbour.
By contrast, the US sends 30 percent of its exports to Canada. Although Canada stands to suffer more in an asymmetric trade war, many Canadians do not want their government to make any concessions to Trump, Lee says. In an opinion poll conducted by Nanos Research last month, 69 percent of Canadians said they were not likely to buy US-made alcoholic beverages even if they returned to shelves.
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