Four months of the trade war


By Zi-Ann Lum, HuffPost Canada

The trade war between Canada and the United States could raise the profile of some domestic industries, but Canadian retailers say that reality hangs on how long the cross-border tiff continues and if consumer attitudes on made-in-America goods shift.

Canada’s dollar-for-dollar retaliatory tariffs targeting $16.6 billion in American imports came into effect on July 1 — after the federal government gave the White House a month to rescind its 25 per cent tariff on Canadian steel, and 10 per cent tariff on aluminum imports.

U.S. President Donald Trump imposed tariffs on aluminum and steel to pressure countries into signing new trade deals, claiming the U.S. is being “taking advantage” of under current pacts including the North American Free Trade Agreement.

Trump justified the set of tariffs against Canada by labelling the Canadian steel industry a threat to U.S. national security, a claim, which was later, walked back by his commerce secretary Wilbur Ross.

Teachable moment for Canadian consumers

Toronto-based Endy makes mattresses, an item that’s on the long list of American imports Canada is adding a 10 per cent surtax on. Endy’s direct competitor is New York-based Casper.

Co-founder and CEO Mike Gettis said Endy’s strong Canadian branding is making them an attractive alternative for shoppers peeved by what’s going on south of the border.

“While we certainly haven’t built our strategy on the prospect of a trade war, the current political climate is educating customers to check their labels and choose ‘Made in Canada’ where possible,” Gettis said.

During a visit to a Hamilton, Ont. steel plant recently, Foreign Affairs Minister Chrystia Freeland announced the finalized list of American-made products Canada is targeting.

“Canada has no choice but to retaliate,” Freeland said. It’s a message Prime Minister Justin Trudeau relayed to Trump himself during a call between the two leaders on the same day.

Why target chocolate, lawn mowers, and orange juice?

Karl Littler, VP of public affairs at the Retail Council of Canada, explained the tariffed items have been carefully curated to inflict maximum economic and political pressure.

Many products that will be taxed coming across the border are produced in areas with politically sensitive seats in the upcoming U.S. midterm elections in November, Littler noted. Other items are on the list to motivate shoppers to choose Canadian alternatives, he said.

“There’s not a lot of oranges grown in Canada — so obviously fresh orange juice isn’t substitutable domestically, but maple syrup is,” Littler told HuffPost Canada in an interview.

Canada currently imports $17 million in maple sugar and maple syrup products from across the border.

With the tariffs now in effect, Canadian consumers can expect to pay a little more for maple syrup from Vermont, making Quebec maple syrup more competitive.

Also on the government’s tariffs list: chocolate (a.k.a ‘sugar confectionary’ in official government classification speak).

Chocolate is a major export item for Hershey, Penn. It’s also a company based in a district represented by Republican Congressman Charlie Dent, a frequent Trump critic who recently announced his retirement.

“Interestingly, chocolate ends up on the list,” Littler said. The motivation here is the counter tariffs are designed to make an economic impact on swing state districts, noticeable enough to get workers (concerned about job stability) to pressure incumbent Republicans to lobby the White House to back off on Canada.

When it comes to prices at home, Canadians shouldn’t expect dramatic sticker shock, said Littler.

The 10 per cent tariff proposed for household and food items such as toilet paper and orange juice is for wholesale prices.

For example, for toilet paper bought at wholesale at $2 and sold at retail for $5 (after taking into account labour, advertising, occupancy, and utility costs), the 10 per cent tariff would apply only on the wholesale costs: 20 cents.

When asked if the Liberal government’s tariffs will be effective, Littler said it’s hard to say because it’s difficult to forecast how long the trade dispute will be, let alone Trump’s unpredictable temperament.

“We’ll see … President Trump is not easily dissuaded from a course of action, but he’s also changeable,” he said. “And so obviously you take your best shot.”

Feds playing politics, not economics: Ontario company

Prior to the release of the government’s final tariffs list, Ontario-based Nuts to You Nut Butter Inc. wasn’t convinced a brewing trade war would benefit their company because nobody knows how long the tariffs will stick.

“I don’t think it’s something important to bank on,” said Anne Lawrence, the sales and marketing director at the family-owned company. “Our government hasn’t done it to support us, necessarily, they’re doing it as a political move.”

The company, which makes a range of products including peanut, almond and cashew butters, doesn’t think sales will increase with more shoppers picking up their product instead of an American one.

And it turns out Lawrence’s initial hunch was spot-on. Nut butters had appeared on the original proposed list of American items targeted by a Canadian surtax, however was dropped from the government’s final list.

In the short-term, the Canadian tariffs will likely mean a small increase at checkout. The cost for the consumer will compound the longer the Canada-U.S. trade war continues — depending on how quickly ketchup, mattresses, or sailboats are replaced in Canadian households.

American manufacturers may also lower their prices if vendors consider Canada a vital market.

Canadian steel takes a hit

Steel pipe manufacturer Tenaris Algoma Tubes announced Saturday that it’s laying off 40 people due to the U.S. tariffs — a day after the federal government announced up to $2 billion in new funding to support affected sectors.

The move comes after the Sault Ste. Marie, Ont. company announced in December it would fill 50 new jobs. But a month of Trump’s tariffs was enough to throw the company’s business outlook into uncertainty, creating an “unsustainable market” for its products to get to U.S. customers.

Ken Neumann, national director of the United Steelworkers (USW) union in Canada, wishes the prime minister would have taken a more aggressive stance against Trump after NAFTA talks hit a wall over disagreement over a sunset clause.

“[Trump’s] using this as a lever to basically say to Canada, you didn’t give me what I want, so you’re getting the 25 and 10.”

Neumann thinks the tariffs on U.S. goods should have been effective at midnight the same day they were announced. It’s a course of action the Conservative Party thinks could have been implemented to at least collect levies to help steel and aluminum manufacturers.

The USW has companies on both sides of the border who are going to be hit going either way. It’s a frustrating scenario considering some automotive parts go back-and-forth two or three times before a final product is made, Neumann explained.

During an interview with Fox News on Sunday, Trump said he’s “not happy” with NAFTA and that he wants to make a future deal “more fair” to the states.

Trump told “Sunday Morning Futures” host Maria Bartiromo he wants to wait until after November’s midterm elections to make a move on NAFTA.

He explained he’s optimistic that Canada and Mexico will agree to a “fair” deal because has the auto industry as leverage.

“I have a feeling it’s going to be fine. And the reason is because if they’re not fine, I’m going to tax their cars coming into America,” Trump said. “And that’s the big one.”

Slapping tariffs and threatening to impose devastating tariffs on Canada’s auto industry is Trump’s way of exercising political leverage over the prime minister on NAFTA, Neumann said.

“To me, it’s not going to bode well for either country. But for all purposes, why would you go after your best neighbour? It just makes no sense.”