Canada dodges tariff bullet, at least for now

The only two countries escaping tariffs were America’s neighbours: Canada and Mexico

Canada appears to have dodged a protectionist bullet, as one of only two countries to receive a provisional exemption from steel and aluminum tariffs set to rip into America’s trading relationships around the globe.

President Donald Trump signed proclamations Thursday slapping U.S. tariffs of 25 per cent on steel and 10 per cent on aluminum from almost every country, with the penalties snapping into effect in 15 days.

After months of frantic lobbying, diplomatic arm-twisting and heated debates within his own administration, Trump made good on his tariff threat at the White House, surrounded by steelworkers.

The only two countries escaping tariffs were America’s neighbours: Canada and Mexico.

Related: Canada, Mexico excused from U.S. tariffs for undetermined period

Related: Possible good news for Canada on tariffs: White House hints ‘carve-out’ coming

It’s not impossible they could be added later, but the president’s own language, the wording of the proclamations and comments from a White House official all went out of their way to avoid any explicit threats against Canada and Mexico, leaving dangling only the vague possibility.

Trump danced around the question of whether the tariff threat will be used to bully Canada and Mexico at the NAFTA bargaining table. He said only that the reprieve remains in place for now and that NAFTA is important to economic and national security.

”Due to the unique nature of our relationship with Canada and Mexico … we’re gonna hold off the tariff for those two countries,” Trump said during a signing ceremony.

”If we don’t make the deal on NAFTA, and if we terminate NAFTA … we’ll start all over again. Or we’ll just do it a different way. But we’ll terminate NAFTA, and that’ll be it. But I have a feeling we’re gonna make a deal on NAFTA. … If we do there won’t be any tariffs on Canada, and there won’t be any tariffs on Mexico.”

The actual formal documents specifically state that Canada and Mexico are a special case, given the continent’s shared commitment to mutual security, an integrated defence industry and the shared fight against dumped steel and that the best way to address U.S. concerns — ”at least at this time” — is by continuing discussions.

The references to security are critical.

By law, the tariffs need to be described as a national security matter. A provision in a 1962 U.S. law allows the president to set emergency tariffs as a security issue. But the White House has repeatedly undermined its own legal case, including by intimating that the tariffs would be held over Canada and Mexico as some kind of negotiating tool to extract NAFTA concessions.

The White House is now clearly avoiding that kind of talk: ”We will have ongoing discussions with Canada and Mexico,” a senior White House official said in a pre-announcement briefing.

The aide expressed frustration at the way the tariffs have been characterized, referring repeatedly to the ”fake news,” the lobbyists and the ”swamp things” that he said exaggerated the ill effects while fighting the measures.

Two polls released this week say the tariffs are unpopular.

But the same official said it truly is a matter of national security — with six U.S. aluminum smelters shutting down the last few years, and just five remaining, and only two operating at full capacity, he said that leaves the U.S. at risk of having to import all its aluminum eventually.

The White House adviser also pushed back against reports casting the process as arbitrary, sloppy and rife for successful legal challenges.

In one alleged example of haphazard policy-making, a report this week said the president raised the tariff rates for branding purposes, increasing them from the 24 and 7 per cent recommended by the Department of Commerce — because he wanted nice, round numbers.

The official insisted that was untrue. He said it was only upon careful calculation of import effects that the numbers landed at 25 per cent and 10 per cent. He did not explain how those round numbers managed to survive intact, even after the formula was later upended by the exclusion from tariffs of major suppliers.

Canada is the No. 1 seller of both steel and aluminum to the U.S.

The fact that Canada might be included on the initial hit list had become a political sore spot for the administration, as U.S. critics of the move ridiculed it by zeroing on the idea of national-security tariffs against a peaceful next-door neighbour and defence ally.

A full-court diplomatic press unfolded in recent days, with Prime Minister Justin Trudeau calling Trump earlier this week, and then speaking Thursday with the Republican leaders of both the House of Representatives and the Senate.

Canada’s ambassador to Washington dined this week with U.S. national-security adviser H.R. McMaster; Foreign Affairs Minister Chrystia Freeland, Natural Resources Minister Jim Carr, Defence Minister Harjit Sajjan, and Transport Minister Marc Garneau all reached out to cabinet counterparts in recent days.

The lobbying found a mostly receptive audience: the U.S. military strongly resisted tariffs against allies and 107 congressional Republicans released a letter this week to express alarm over the move.

“This has been a true Team Canada effort,” said Foreign Affairs Minister Chrystia Freeland, also crediting provincial premiers, businesses and labour leaders.

“This work continues and it will continue until the prospect of these duties is fully and permanently lifted.”

She said Canada planned to keep this issue separate from NAFTA negotiations, as it has done with disputes over softwood lumber, paper, and Bombardier.

Other countries have threatened reprisals, prompting fears of a global trade war. But Trump said other American allies can get exemptions later, in exchange for something in return. He said they need to contact U.S. trade czar Robert Lighthizer, and negotiate.

Alexander Panetta, The Canadian Press

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