Why Trump is bashing Justin Trudeau and threatening trade ties between U.S. and Canada




Donald Trump has ripped into Canadian Prime Minister Justin Trudeau over trade barriers on dairy and lumber in a widening rift between the two countries that threatens longstanding economic ties. Does the U.S. president have a legitimate gripe?

Sorting through the trade numbers is not easy. The U.S. and Canada use different methods, which seldom add up, to calculate imports and exports, making it hard to make apples-to-apples comparisons.

It is true that Canada, by far the largest trading partner of the U.S., is more protective of its economy. The World Trade Organization said in a 2016 report that Canada applies tariffs of 15% or higher to 7.1% of imports. That’s more the double the U.S rate of 2.8%. It also easily exceeds Japan’s 3.7% of imported goods and the European Union’s 4.1%.

Most visibly, Canada has long shielded its $6 billion domestic dairy market from global competition, a system that has rankled American egg and milk producers in Wisconsin, New York and California. And Canada does applies a 270% tariff on some dairy-related imports, a much-tweeted figure for Trump.

The flip side is that not all Canadian dairy receives the same level of protection. What’s more, U.S. dairy producers also get government support, though not as much as their peers in Canada do.

In any case, the U.S. has been able to export twice as much dairy to Canada as it imports.

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The dispute over softwoods, such as pine used for lumber to build homes, is even more complicated. Canada shipped about $5.7 billion worth of softwood to the U.S. in 2016, according to Commerce Department figures.

For years the U.S. government under Democratic and Republican presidents alike has determined that Canada subsidizes lumber production, most of which takes place on government-owned land. Yet Canada has usually won appeals before international mediators.

Even if these disputes were resolved in favor of the U.S., the effect would likely be small. Under the most optimistic scenario, the U.S. might increase sales of dairy and softwood lumber by a few billion dollars a year, but that would be no more than 1% of all U.S. exports to Canada.




Total exports to Canada amounted to a whopping $341 billion in 2017. Imports from Canada were slightly less at $338.5 billion, according to U.S. Census figures.

The small surplus the U.S. ran last year, in fact, was the third in a row with Canada after a streak of trade deficits. Remove oil from the equation — petroleum is Canada’s biggest export — and the picture for the U.S. looks even better.

What next?

Until Trump entered the White House, American trade negotiators typically viewed the disputes over dairy and softwood as chronic but manageable irritants in a neighborly bilateral relationship.

Still, they have been flashpoints for key U.S. lawmakers in both parties, such as Senate Minority Leader Charles Schumer, the Democrat from New York, and Paul Ryan of Wisconsin, the outgoing Republican speaker of the House. Both are from big dairy-producing states.




Even former President Barack Obama, who was buddy-buddy with Trudeau, repeatedly pressed him to relax restrictions on imported dairy. The Obama administration launched a probe of Canadian softwood prices that eventually led the Trump White House to reimpose fresh duties earlier this year.

The stepped-up attacks on Canada’s dairy and lumber rules probably can be seen part of an effort to ramp up pressure on Trudeau to cede more concessions on automobiles in renegotiations over the North American Free Trade Agreement.

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The U.S. has run large deficits for years in automobiles with both Canada and Mexico, a situation accelerated by the 1994 North American Free Trade Agreement. That sticks in the president’s craw.

The Trump administration wants to alter the rules of Nafta in such a way as to shift more production back to the United States. Both Mexico and Canada have resisted U.S. pressure, raising doubts about whether a new deal can be renegotiated. Trump has ardently criticized Nafta and threatened a U.S. departure from the pact absent major give-backs.

The U.S.-Canadian trade partnership will undoubtedly survive and thrive in the long run, but rocky times lay immediately ahead.

“Relations with key trading partners are likely to get worse in the near term before they get better,” said Gregory Daco, head of U.S. economics at Oxford Economics.

This article originally appeared here via Google News