Trade

Trump to Resume His Trade War With Canada

JM Ashby
Written by JM Ashby

Trump rolled back his tariffs on steel and aluminum imported from Canada when they, along with Mexico and the United States, tentatively agreed on the terms of the so-called Unites States Mexico and Canada Agreement (USMCA) -- Trump's fake replace for the North American Free Trade Agreement (NAFTA) -- but Trump is reportedly planning to resume his trade war with Canada.

July 1st marks the official beginning of the USMCA, but any fanfare or celebration of it on Main Street or Wall Street will be limp at best. American officials say the will reimpose duties on Canadian aluminum on July 1st if they don't voluntarily restrict their own exports to the United States.

And the timing isn't a coincidence. They plan to invoke the USMCA to reignite the trade war on the same day it takes effect.

The deal contained a provision that allowed the United States to again raise tariffs in the event of a surge in imported products. The countries promised to carry out consultations if a surge occurred, and if those were not successful, the governments could impose a tariff of 25 percent on steel products or 10 percent on aluminum products.

American officials have tried to persuade their Canadian counterparts to voluntarily restrain their own exports. Those discussions included a call Friday on between Kirsten Hillman, Canada’s ambassador to the United States, and senior officials with the Office of the United States Trade Representative. [...]

The Office of the United States Trade Representative did not respond to requests for comment. Speaking at a virtual event on Tuesday, Ms. Hillman said that discussions were continuing over the issue, and that Canada firmly believed that their aluminum exports were not “hurting the U.S. market in any way.”

Representatives from the Aluminum Association say this is not helpful and they're not asking for it. They say imports for Canadian aluminum are currently in line with market and historical conditions.

The New York Times reports that just two American companies are asking the Trump regime to reimpose tariffs. Those are Century Aluminum, which is based in Chicago with factories in Kentucky and South Carolina (and Iceland) -- and Magnitude 7 Metals, which has just one factory in Missouri.

The American Primary Aluminum Association (not to be confused with the Aluminum Association) which represents the two companies say imports of Canadian aluminum have caused prices to collapse, but now more than possibly ever I feel confident in saying that is preposterous.

If prices are collapsing (no one else is saying this) it would be because of the global coronavirus pandemic and recession which actually led to deflation last month.

I think it's clear -- and it has been from the very beginning -- that Trump has waged a trade war and will resume it for political reasons. These two aluminum companies and many others who came before them are failing companies with evidently bad management and business models. The Invisible Hand of the Free Market reached out and chose to buy aluminum from someone else, but fortunately for them there's a protectionist Republican in the White House who is willing to help them for his own reasons.

Canada has higher taxes and labor standards than the likes of Kentucky, South Carolina, or Missouri. If they companies in these states can't compete with the price of Canadian goods, they're just shitty companies.

I don't think Trump's fake NAFTA replacement will collapse because of this, but he could effectively nullify parts of it or offset any potential gains. Trump's trade representative Robert Lighthizer testified in front of Congress last week where he hinted that the regime may also reimpose tariffs on Mexican goods and other Canadian goods aside from aluminum after the USMCA takes effect.

Mr. Trump’s top trade official indicated that the United States was readying challenges in areas where it believed Canada and Mexico might not be in compliance with the new agreement, including over Mexico’s treatment of labor issues and biotechnology products.

Supporters will likely say this is evidence that the USMCA is working, but I would say it's evidence that Trump does not honor any of his agreements.

It would be one thing if the allegations against Canadian and Mexican exports were substantiated, but they haven't been. He's been in office for almost four years and Trump still hasn't demonstrated that he actually understands how trade works to begin with.

It may not be a coincidence that Trump is escalating trade tensions with China, Canada, Mexico, and the European Union all at once. He's desperate for buttons to press as the election draws near.

  • muselet

    From May of last year until February of this year, the price of aluminum ranged from a bit over $1850/tonne to a bit under $1700. The price dropped from February until April or May, when it bottomed out below $1500. As of now, the price is $1592/tonne. Trading Economics helpfully informs us the price dropped $212.50/tonne (11.78%) in 2020.

    That is, to state the obvious, not a collapse.

    My guess is that Century Aluminum and Magnitude 7 Metals are run by people who know Donald Trump, but it could be that Trump just wants a club to wield against Canada and chose the American Primary Aluminum Association’s complaint as a handy cudgel.

    It should be possible to repair relations with Canada and Mexico (and China and the EU and the UK) once Trump is gone, but it will be a very long time before any other country will trust the US again. Vladimir Putin must be positively gleeful.

    –alopecia