There’s a new, somewhat unexpected target in the crosshairs of President Donald Trump’s trade agenda: Canada.
And interestingly enough, Trump’s zeroing in on one of the US’s closest allies has garnered bipartisan support from the likes of Senate Minority Leader Chuck Schumer, Democratic Sen. Amy Klobuchar of Minnesota, and Republican Gov. Scott Walker of Wisconsin.
Like Mexico and China before it, Canada finds itself on center stage in Trump’s trade agenda. The bordering nation is preparing for what appears to be a rapidly escalating battle on softwood lumber and dairy — and, in the larger scope, the renegotiation of North American Free Trade Agreement.
The loudest shot in the developing battle was fired late Monday, when the Trump administration announced that the US will slap a 20% tariff on Canadian softwood lumber imports. Washington argued that the Canadian government unfairly subsidizes the sale of lumber products to the US, and said previous attempts at negotiating a settlement have failed.
“Canada is a good neighbour,” Commerce Secretary Wilbur Ross said Tuesday during an appearance at the White House daily press briefing. “But they have got to play by the rules.”
Ross said he didn’t think the disputes would spark a trade war between the two nations.
Trump himself took a swing Tuesday morning, hammering Canada for its milk-pricing policies, which he argued effectively blocked US exports from the Canadian market and put American farmers at a disadvantage.
“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!” he tweeted.
The actions followed a series of unexpectedly harsh words from Trump on Canada the previous week, a departure from the warm greeting Trump extended to Canadian Prime Minister Justin Trudeau in February, at which he said the US-Canada trade relationship would only require “tweaking.”
“It has been a bad week for US-Canada trade relations,” Ross said Monday night. “This is not our idea of a properly functioning free-trade agreement.”
The escalation of trade tension between the two nations, specifically on the importing and exporting of dairy products and softwood lumber, has been welcomed by leading politicians in both parties representing states along the US-Canadian border.
“I welcome Pres Trump’s opposition to Canada’s unfair dairy trade barriers,” Schumer tweeted Tuesday. “Will fight w him to help NY farmers & reverse this unwise policy.”
Klobuchar said in a Monday night statement that the new tariffs being proposed by the administration “could bring welcome relief to workers, producers, and rural communities in Minnesota and across the country that have been hurt by unfairly traded softwood lumber.
She said the countries should work to negotiate a new agreement related to softwood lumber. Her Minnesota counterpart, Democratic Sen. Al Franken, one of Trump’s staunchest critics in the Senate, praised the Trump administration as well for taking up the cause of dairy farmers in his state. He added though that Trump must “move beyond simply saying the right things.”
“We need swift action to help American dairy farmers get through this crisis,” he said. “I plan to fight for a solution and I’ll be continuing to press the president on this issue.”
Meanwhile, Walker, one of the more conservative governors in the country, joined Democratic Gov. Andrew Cuomo of New York in writing a recent letter to Trump urging him to take up the cause. The Wisconsin Republican tweeted to Trump Tuesday: “Thanks for supporting WI diary farmers!!!”
Canada has been swift to issue its own response, doubling down and preparing for “any eventuality with the US.”
“The government of Canada disagrees strongly with the US Department of Commerce’s decision to impose an unfair and punitive duty,” Canadian Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr said in a joint statement. “These accusations are baseless and unfounded.”
“This decision will negatively affect workers on both sides of the border, and will ultimately increase costs for American families who want to build or renovate homes. The U.S. National Association of Home Builders has calculated that a $US1,000 increase in the cost of a new house would put home ownership beyond the reach of more than 150,000 American families, and jeopardize thousands of jobs in the American home construction industry. The government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation.”
The decades-long lumber battle
The Trump administration’s tariff announcement on Monday escalated a disagreement between the two countries that dates back to the 1980s. Imposing tariffs on Canadian softwood lumber products is not an unprecedented response to the dispute, but it has proven ineffective in the past.
The US lumber industry has frequently argued that Canada improperly subsidizes lumber by offering cheap rates to cut trees on land owned largely by the Canadian government. In previous disputes, the squabbling has led to punitive tariffs imposed by the US, which were often reversed after international trade tribunals sided with Canada. The two countries then negotiated settlements.
“With respect to softwood lumber, our producers and workers have never been found in the wrong,” Freeland said in a statement.
She added: “The softwood industry supports thousands of jobs in both countries and has downstream benefits in communities across the continent … the United States needs Canadian lumber. A protracted dispute will only drive up the cost of wood and homes for U.S. consumers.”
The current dispute stems from 2015, when an agreement reached under the George W. Bush administration expired. After American mills filed a complaint, the US Commerce Department determined that five Canadian companies had received subsidies ranging from 3% to 24% and ordered countervailing duties.
The tariffs the US seeks to impose would affect roughly $US5 billion worth of Canadian lumber imports, Ross told Reuters.
“It’s about 31.5% of the total US market, so it’s a pretty big deal in terms of the Canadian relationship,” he said.
While US lumber producers have praised the Trump administration’s action, not all Americans are celebrating. US homebuilders say such tariffs will dramatically raise the price of new houses, and eliminate construction jobs, the New York Times reported.
The National Association of Home Builders last year found that a 15% tariff would raise home prices by 4.2% and cost 4,666 full-time jobs.
The dairy dispute
Similarly to the softwood lumber debate, Americans have long complained about Canadian dairy production. The US has taken issue with Canada’s supply management system, which is used to regulate dairy pricing and provide production quotas to help prevent surpluses and deficits.
Last year, Canada implemented a policy that created a new class of milk prices for ultra-filtered milk, a liquid, high-protein concentrate sometimes used to make products such as cheese and yogurt. Canada lowered the prices for this milk class, so as to incentivise domestic ultra-filtered milk and better compete with the US-produced imports.
The American dairy industry did not take kindly to these developments, and argued that the policy violates NAFTA. Dozens of farmers in Wisconsin and New York have said the Canadian milk pricing policy has negatively affected them, and has eliminated millions of dollars’ worth of access to the Canadian market.
“What they have done to our dairy farm workers is a disgrace. It’s a disgrace,” Trump told reporters last Thursday.
The Canadian dairy industry has shot back that the milk reclassification policy did not change import rules nor did it impose any import taxes. Instead, Canadians argue, the American dairy sector’s losses are caused by US and global milk overproduction.
“Canada upholds our international trade obligations,” Canada’s ambassador to the US David McNaughton wrote in a letter to Cuomo and Walker. “Under the North American Free Trade Agreement, the US has duty-free and quota-free access for milk protein substances, including ultra-filtered milk. … This duty-free and quota-free access has not changed.”
NOW WATCH: Spicer struggles to clarify remarks after falsely claiming that Hitler didn’t use chemical weapons
Business Insider Emails & Alerts
Site highlights each day to your inbox.