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Freeland threatens trade sanctions against U.S. over electric vehicle credit – National Post

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A letter to U.S. senators says Canada is prepared to meet the U.S. credit with retaliatory trade sanctions against American products not limited to just the auto sector

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OTTAWA – Canada is firing a warning shot to U.S. lawmakers that a proposed tax credit for electric vehicles is a threat to the USMCA trade agreement and will come with significant retaliatory sanctions against U.S. businesses.

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Finance Minister Chrystia Freeland and Trade Minister Mary Ng sent the letter to several high-ranking U.S. senators as the bill proposing the tax credit is in the U.S. Senate for consideration. Prime Minister Justin Trudeau raised the idea in a meeting with U.S. President Joe Biden last month, but Biden did not commit to changing the legislation.

The proposal would give consumers a tax credit of up to $12,500 to purchase an electric vehicle, provided it is made in an American and unionized factory. The credit has been a concern to the Trudeau government since it was first announced, in addition to Trudeau’s visit Ng has made recent trips to Washington to lobby for changes.

In the letter the two ministers warn that the credit is a violation of the United States Mexico Canada Agreement (USMCA) and Canada is prepared to seek legal action against it through the deal.

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“The proposal is a significant threat to the Canadian automotive industry and is a de facto abrogation of the USMCA.”

The letter argues that the tax credit would amount to a 34 per cent tariff on Canadian made vehicles and because of the current integration between the two countries it would be a major blow to the whole industry.

“Given the deep integration of our respective automotive industries, the proposal would have important repercussions in the U.S., affecting American production and jobs.”

The auto sector with manufacturers making the move to electric vehicles, with plans to phase out gas engines completely as early as 2030 for some car makers. That means plants will have to be retooled and the investment decisions currently being made about where to construct or open new factories could have consequences for decades.

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“We have been building cars together for over 50 years. Given the deep integration of our respective automotive industries, the proposal would have important repercussions in the U.S., affecting American production and jobs.”

The letter makes clear Canada is prepared to meet the U.S. credit with retaliatory trade sanctions against American products, but also makes clear that those sanctions won’t be limited to just the auto sector.

“Canada will defend its national interests, as we did when we were faced with unjustified tariffs on Canadian steel and aluminum,” the two ministers wrote. “While including the auto sector, our proposed retaliatory actions will extend across a number of sectors. At the same time, we intend to make clear which U.S. businesses and workers will be impacted.”

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During USMCA negotiations the Liberal government used trade sanctions as a political weapon targeting industries and businesses in politically important American states.

The Liberals also say in the letter they are prepared to delay implementation of some of the key concessions Canada made during the USMCA talks including some of the protections for the Canadian dairy industry as well as protections

“If the U.S. proceeds with the tax credit provisions as drafted, we would see this as a significant change in the balance of concessions agreed to in the USMCA.”

The proposed credit faces resistance inside the U.S. as well. West Virginia Senator Joe Manchin, who is copied on Freeland and Ng’s letter, has said he opposes it because it singles out union-made vehicles.

The letter makes clear Canada is hoping to avoid this fight and work with the Biden administration on promoting electric vehicle production, but it wants to ensure Canadian manufacturers are not targeted.

“There is an opportunity to work together to resolve this issue by ensuring Canadian-assembled vehicles and batteries are eligible for the same credit as U.S.-assembled vehicles and batteries.”

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Email: rtumilty@postmedia.com

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Workers at Teck Resources’ British Columbia mine to hold ratification vote

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Canadian miner Teck Resources Ltd said on Monday that a union representing 1,048 workers at its British Columbia mine has agreed to hold a ratification vote on the mediators’ recommendation.

The union will schedule a ratification vote to be concluded no later than January 24, the company said.

Last week, the company said it had received a strike notice https://reut.rs/3A7TJZQ from the union at its Highland Valley Copper Operations in British Columbia, without providing any reasons behind the potential strike.

 

(Reporting by Rithika Krishna in Bengaluru; Editing by Chizu Nomiyama)

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Markets split on BoC decision as business survey, inflation loom – BNN

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The Bank of Canada is getting a pair of key indicators this week ahead of a rate decision next Wednesday that’s virtually a coin toss, as far as markets are concerned.

First up on Monday, the central bank releases its quarterly Business Outlook Survey, which provides a snapshot of how approximately 100 corporate leaders are feeling about the economy and their own business fundamentals.

When the last survey was released in October, it showed the broadest gauge of sentiment was at the highest level in the survey’s history. That was despite worsening labour shortages and as more than half of respondents (57 per cent) said they expected labour costs to accelerate over the next year.

“[Monday’s] Business Outlook Survey might have been completed too early to catch Omicron uncertainties, so expect respondents to retain a healthy dose of optimism,” said CIBC World Markets Chief Economist Avery Shenfeld in a report to clients Friday.

“The survey could show a majority expecting inflation to run above the top end of the Bank of Canada’s one-three per cent inflation band. If not for Omicron, that would spell a rate hike in January, but the uncertainties surrounding how long this disruption will last should be enough to defer that decision.”

Meanwhile, Statistics Canada will release the consumer price index for December on Wednesday. Economists are expecting to see inflation rose 4.8 per cent year-over-year in the month; that would be the fastest rate of growth since 1991.

As of 8:30 a.m. Monday morning, market data shows investors see a 59 per cent chance of a rate hike when the Bank of Canada delivers its decision on Jan. 26.

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House Price Index rose 26% in 2021, fastest pace on record – CBC News

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The Canadian Real Estate Association’s House Price Index rose by 26.6 per cent in the 12 months up to December, the fastest annual pace of gain on record.

The group, which represents more than 100,000 realtors and tabulates sales data from homes that listed and sell via the Multiple Listings Service, said the supply of homes for sale at the end of the month hit an all-time low.

After pausing for a few weeks in the early days of the pandemic, Canada’s housing market has been on an absolute tear for the past two years, as feverish demand from buyers wishing to take advantage of rock-bottom interest rates has drastically outpaced the supply of homes to buy.

That imbalance is a major factor contributing to higher prices, as buyers have to pay more and more to outbid others because of the lack of alternatives.

Various experts are suggesting that parts of the country are showing signs of being in a speculative bubble, and CREA says the biggest reason for runaway price increases is that there aren’t enough homes being put up for sale.

“There are currently fewer properties listed for sale in Canada than at any point on record,” CREA’s chief economist Shaun Cathcart said. “So unfortunately, the housing affordability problem facing the country is likely to get worse before it gets better.”

High prices not denting demand

CREA says the average price of a Canadian home that sold on MLS in December went for $713,500. That’s actually down from the record high of more than $720,000 in November, but still well up on an annual basis.


High prices don’t seem to be slowing demand, however, as 2021 was the busiest year for home sales ever. Some 666,995 residential properties traded hands on MLS last year, smashing the previous annual record by 20 per cent.

TD Bank economist Rishi Sondhi said that there was a less than two-month supply of homes for sale during the month, which means at the current sales pace, all listings would be gone in less than two months. Under normal conditions, there’s a five-month supply of homes for sale, and Sondhi says that supply and demand imbalance is a major factor in eye-popping price gains.

“With interest-rate pull-forward behaviour keeping demand so strong, and supply struggling to keep up, it’s little wonder why prices are continuing their relentless upward march,” he said. “Buyers pulling forward demand ahead of looming interest rate hikes kept sales at unsustainable levels last month. How long this effect will last is uncertain, but it should eventually fade.”

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