If the Trump administration buys the argument that Canadian aluminum exports have surged and slaps a 10 per cent tariff back on products imported from Canada, the move could end up hurting Americans instead, warns the head of the association representing Canada’s aluminum producers.
“Canada stands to win more in a situation like this,” said Jean Simard, the president and CEO of the Aluminum Association of Canada.
“Production will keep going on, exports will keep going on, and at the end, unfortunately, it’s the U.S. economy that will bear the brunt of this increase in tariffs.”
The damage, Simard said, will be more on the political side, given how much political capital the Trudeau government spent on persuading the U.S. government to lift steel and aluminum tariffs in May 2019.
Last week, U.S. Trade Representative Robert Lighthizer fuelled D.C. rumours of a possible return to tariffs by telling the Senate Finance Committee that a recent spike in imports is a “genuine concern.”
Followers of Canada’s long-running battle with the U.S. softwood lumber industry have seen this drama play out before.
As with softwood, the U.S. needs imported aluminum to meet its domestic demand.
Tariffs or no tariffs, the U.S. consumes up to six million tonnes of aluminum every year. But its struggling domestic industry produces only 800,000 tonnes of that.
These bandits would tax their own military to buy the votes of morons …– Flavio Volpe, Automotive Parts Manufacturers Association
Now, some players in the U.S. aluminum industry (but not all of them) are leveraging their political influence to gain a price advantage over foreign competition.
Why does this lobbying work? Well, there’s an election coming in November. And the Trump administration draws a straight line between protecting jobs and winning votes.
How the ‘snap back’ works
When the previous round of American steel and aluminum tariffs ended, the joint statement issued by Canada and the U.S. laid out conditions under which tariffs could “snap back,” or re-apply.
“In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time,” the statement said (without defining a “meaningful surge” or what that time comparison should be), “with consideration of market share” (again, this ideal share is undefined) “the importing country may request consultations with the exporting country.”
A formal consultation process hasn’t been publicly requested, agreed to or even disclosed. The Canadian side says regular conversations with the Americans about monitoring aluminum shipments have been underway for several weeks; one such conversation involved Canada’s ambassador in Washington last Friday.
“After such consultations, the importing party may impose duties of 25 per cent for steel and 10 per cent for aluminum in respect to the individual product(s) where the surge took place,” the 2019 statement continued. “If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector.”
In other words, no politically-damaging Canadian tariffs on Kentucky bourbon or Florida orange juice next time.
Searching for a surge
All the U.S. lobby needed to reignite this tariff heat was evidence it could spin as a “surge.” In the volatile market conditions of this past year, American protectionism saw its opening.
First came last fall’s rail strikes and last winter’s protest blockades, disrupting the regular flow of aluminum shipments into fits and starts. Then the COVID-19 pandemic hit, shutting down North American automotive production.
Smelters can’t stop production just because their contracts for value-added alloyed steel products are on hold for a few months. The massive costs and environmental risks aren’t worth it.
So earlier this year, Canadian producers pivoted temporarily to primary aluminum ingots — a basic commodity that can be stored in a warehouse until the market picks up, at which point it can be melted into something specific.
This “P1020” aluminum is the focus of the data now being spun around Washington. It’s a commodity that directly competes with output from older and less-efficient American facilities.
‘False’ and ‘unfounded’
Canada rejects the idea of voluntarily restricting production to satisfy American demands. (It’s also not really proper for publicly-traded corporations to do.)
This unwillingness to go along with voluntary export quotas is what sparked the latest tariff threats: higher prices discourage imports by another means.
Simard said the total volume of aluminum coming out of Canada hasn’t changed significantly — only the type of product has changed, for reasons that are entirely short-term and related to the pandemic.
Allegations of a threatening surge are “totally false” and “unfounded,” he said.
“It’s purely market dynamics,” he said, adding that the same substitutions happened during the last financial crisis in 2008-09.
“Everybody is doing this. It’s the only way to keep plants operating and keep the link with the market,” he said. “The problem is caused directly and certainly by COVID. It’s a matter of months for the situation to correct itself.”
An ‘extortion syndicate’
A decision by the Trump administration to reapply the tariff would be curiously timed.
In the new North American trade agreement that takes effect July 1, the Trump administration specifically negotiated requirements for the automotive industry to use more North American steel and aluminum, in an effort to shut out offshore suppliers and repatriate jobs.
Canadian aluminum is geographically convenient and produced in cost-efficient mills, so in theory, the new NAFTA should be a growth opportunity.
But depending on whether a new tariff is applied specifically to P1020 aluminum or across the board — hitting value-added automotive inputs as well — the Trump administration could be taxing automotive suppliers by an extra ten per cent, just as they’re struggling to recover.
“Canada would be foolish to accept quotas of any sort,” said Jerry Dias, the president of Unifor, the union that represents Canadian auto workers.
“The long-term negative ramifications for Canada would be huge. But it would be equally so for the United States. All it does is gouge the American consumer.”
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association, said this apparent hustle to slap tariffs back on before the USMCA takes effect (as early as Friday, according to a report earlier this week from Bloomberg News) is further evidence that “an unprincipled extortion syndicate is in charge of U.S. trade policy.”
“The biggest gangsters wear the cleanest suits,” he said. “Has anyone seen this kind of behaviour by trading partners in the history of the post-industrial world?”
“These bandits would tax their own military to buy the votes of morons in an election year,” Volpe said, referring to the wide use of Canadian aluminum in U.S. defence procurement.
‘No harm … no threat’
Deputy Prime Minister Chrystia Freeland’s office emailed a statement to CBC News Tuesday saying the government “will always defend Canada’s aluminum sector and its workers.”
It characterized the state of play as “ongoing conversations with our American partners.”
Shortly after, Treasury Board President Jean-Yves Duclos told reporters that Canada is keeping its commitment to monitor its aluminum trade and prevent other countries from dumping cheap products into the North American market.
“The use and production of aluminum in Canada is no harm and no threat to our American friends and neighbours,” he said. “The free flow of aluminum across our border is a mutual benefit to both countries and workers in both countries.
“It makes our businesses more competitive, in particular in the automobile industry. It also reduces cost to consumers.”
But what happens if the Americans don’t see it that way?
Should Canada limit its retaliation to what was agreed to in the 2019 statement — and target only U.S. aluminum? Or would all bets be off if the U.S. no longer appeared to be operating in good faith?
During a webinar session hosted by the American Council for Capital Formation, Canada’s ambassador in Washington, Kirsten Hillman, wouldn’t be drawn into a discussion of what form of retaliation Canada might pursue this time if the U.S. re-imposes tariffs.
“Like all aspects of our economy there can be challenges, right now in particular,” she said. “But we firmly believe that Canadian aluminum exports to the U.S. aren’t hurting the U.S. market in any way.”
Canada, U.S. excluded from Britain's new quarantine-free travel list – CTV News
Britain is allowing travellers from dozens of countries to arrive without self-isolating for 14 days, but Canada and the U.S. are not on the list.
On Friday, the British government announced it would cancel the two weeks self-isolation requirement for people arriving from countries deemed a “lower risk” for the coronavirus.
According to the guidance, travellers who have only been to or stopped in the countries on the list during the previous 14 days won’t have to self-isolate upon their arrival in Britain.
Some of the countries on the “travel corridor” list include Germany, France, Spain, Italy, Greece, Belgium, Australia, and New Zealand.
Both Canada and the U.S. did not make the list.
With confirmed cases of COVID-19 climbing in 40 of 50 U.S. states and a record 52,300 newly reported cases on Friday, the U.S. remains the hardest-hit country in the world.
Canada, on the other hand, has seen a steady overall decline in new cases in recent weeks.
Other notable omissions from the list of 59 countries include Russia, Sweden, Portugal, India, and China. No countries in North, Central, or South America were given the exemption.
U.K. Transport Secretary Grant Shapps explained that countries will be given a colour based on a traffic-light system – meaning green is for low risk, amber is for medium-risk, and red is for high-risk.
The U.S., for example, falls into the red category, according to the secretary.
The changes come into effect July 10 and only apply to arrivals in England with the semi-autonomous administrations in the rest of the U.K. – Scotland, Wales and Northern Ireland – refusing to lift the quarantine period for travellers on the list.
The British government has chosen to relax the travel restrictions despite the fact that the U.K. has recorded nearly 44,000 deaths related to coronavirus, only behind the U.S. and Brazil as countries with the most deaths worldwide.
With files from The Associated Press
Canada suspends extradition treaty with Hong Kong over new security law – CBC.ca
Canada is suspending its extradition treaty with Hong Kong as part of a package of responses to the new security law China has imposed on the territory, Prime Minister Justin Trudeau said Friday.
Canada will also treat sensitive goods being exported to Hong Kong as if they were being sent to mainland China.
“Effective immediately, Canada will not permit the export of sensitive military items to Hong Kong,” Trudeau said in a news conference.
China imposed strict new controls on Hong Kong this week, meant to give Beijing more power to police anti-government protests and other activities it considers the work of hostile foreign powers.
Trudeau suggested the new law is a threat to the “one country, two systems” philosophy that was supposed to last 50 years after Britain returned Hong Kong to China in 1997.
Canada’s relationship with Hong Kong, including freer trade and travel than is allowed between Canada and mainland China, depends on that principle, Foreign Affairs Minister Francois-Philippe Champagne said in a separate statement.
“This process demonstrated disregard for Hong Kong’s basic law and the high degree of autonomy promised for Hong Kong under the ‘one country, two systems’ framework,” Champagne said.
“Hong Kong’s role as a global hub was built on that foundation. Without it, Canada is forced to reassess existing agreements.”
Other countries are considering offering asylum. About 300,000 Canadians live in Hong Kong.
“We will continue to support the many connections between Canada and Hong Kong while also standing up for its people,” Trudeau said.
Watch: Trudeau says Canada is suspending the extradition treaty with Hong Kong:
Canada’s moves follow measures taken by the United States earlier this week to tighten trade with Hong Kong and stop selling it military equipment.
Britain announced that up to 2.6 million Hong Kong residents will be able to move to the United Kingdom for up to five years and ultimately seek citizenship.
Those are holders of special overseas British passports that have had much more limited rights attached to them until now. Trudeau hinted that something similar might be in the works in Canada.
“In the days and weeks to come, we’re also looking at additional measures, including around immigration,” he said.
The relationship between Canada and China remains extremely strained. China is holding two Canadians, Michael Kovrig and Michael Spavor, on national-security charges that Canada considers retaliation for the arrest of Huawei executive Meng Wanzhou in Vancouver in 2018 on a U.S. extradition warrant.
READ | Canada’s statement on Hong Kong’s new security law:
Trudeau unsure about Washington trip, cites concern over tariffs
OTTAWA (Reuters) – Canadian Prime Minister Justin Trudeau said on Friday he was still unsure whether he would go to Washington D.C. next week to mark a new North American trade treaty, citing concern about possible U.S. tariffs on aluminum.
Mexico’s President Andres Manuel Lopez Obrador, who is due to meet U.S. President Donald Trump next week, has said he would like Trudeau to attend.
(Reporting by Steve Scherer; Editing by Marguerita Choy)
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