Trade talks between Canada and the U.S. have failed to produce an agreement that would have prevented new tariffs coming into force, sparking another period of tension between the historic allies. The two governments were working toward a deal that would avoid 50 percent duties on a host of Canadian goods. Despite President Donald Trump stating this week that a “very good deal” was close to being finalized, reported disagreements over the terms on cars and alcohol, among other things, appear to have dashed hopes of any agreement.
In a statement on Friday, Canadian Prime Minister Mark Carney said that “last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal.” The U.S. side, meanwhile, described the breakdown as “a missed opportunity for Canada to partner with the United States, which is the fastest growing economy in the G7.” The tariffs are being imposed under Section 338 of the Tariff Act of 1930, which the Office of the U.S. Trade Representative (USTR) said permits the president to “impose duties of up to 50 percent on imports of a foreign country to offset the burden or disadvantage from a foreign country’s unequal imposition on or discrimination against the commerce of the United States.” The duties target motor vehicles, alcoholic beverages, and dairy, and are being used “to offset Canada’s unreasonable and discriminatory measures against these products,” it said. And the collapse in negotiations means 50 percent duties on hundreds of Canadian products together worth around $20 billion have now taken effect.
Last year, several Canadian provinces banned the sale of U.S. alcohol in response to President Trump’s tariffs. Many continue to do so, creating difficulty for American merchants. Prime Minister Carney had requested that these bans be shelved to help the negotiations with the U.S., and NBC News reports that the issue had become a key point of contention between the two sides.
The administration said that a 50 percent duty on the country’s alcohol would help to “offset the burden or disadvantage on U.S. commerce from Canada’s discrimination.” The U.S. had been lobbying Canada to adjust its dairy quotes to grant more access for American producers, and has accused the country of denying it the benefits “Canada affords to materially similar dairy commerce from certain other foreign countries.” As a result, dairy products, including milk, cream, whey, caseinates, lactose and cheese ingredients have now been hit with the new 50 percent duty. The government’s announcements on motor vehicle and alcohol duties also cover hundreds of unrelated goods, meaning the new tariffs extend well beyond the three categories outside by the USTR. This includes agricultural products such as seeds; food products like bakery mixes; textiles and clothing; cosmetics; furniture and household goods; electronics and machinery; diamonds; and toys.
The new duties are in addition to existing tariffs on Canadian steel, aluminum and lumber. Unlike past tariffs on Canadian goods, the U.S. has said that there will be no exemptions for those covered by the U.S.-Mexico-Canada Agreement (USMCA). However, the White House has confirmed exemptions for energy products, potash, fish, critical minerals and those already covered by Trump’s Section 232 tariffs.
The tariffs were initially meant to take effect on Wednesday, but Trump postponed this deadline for further negotiations. No further talks have yet been announced. The new duties apply to around five percent of the $382 billion worth of goods the U.S. imported from Canada last year.
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