Canadian Manufacturing

Canada’s pre-emptive warning on U.S. tariff talk: don’t tax us, or we’ll tax you

Wrapping up a two day trip to Washington, Canada's Foreign Affairs Minister Chrystia Freeland said if the U.S. imposes border taxes, Canada will hit back



The Canada-U.S. border is one of the busiest in the world. Ottawa has pre-emptively warned the U.S. against imposing tariffs that could disrupt the flow of goods. PHOTO: Patricia Drury, via Wikimedia Commons

WASHINGTON—The Canadian government is launching a pre-emptive warning for American policy-makers considering a tax on cross-border trade: If you hit us, prepare to be hit back.

As she concluded a two-day trip to Washington, Foreign Affairs Minister Chrystia Freeland said Feb. 8 that she told U.S. politicians that Canada would strongly oppose new tariffs—and would respond in kind.

That early warning comes as Congress begins a debate on a once-in-a-generation reform of corporate taxes, following a series of stalled efforts over the years under successive legislatures and administrations.

Freeland said Canada doesn’t intend to provide running commentary on this debate. But she used her trip to register, for the record, Canada’s feelings about one idea being floated. She told lawmakers that if the final legislation includes a tariff-like penalty on Canadian imports, Canada would retaliate.

”I did make clear that we would be strongly opposed to any imposition of new tariffs between Canada and the United States,” Freeland told reporters.

”That we felt tariffs on exports would be mutually harmful. That if such an idea were ever to come into being, Canada would respond appropriately.”

The good news: it’s still hypothetical.

Numerous other tax-reform plans have stalled in Congress over the years and this conversation has barely begun. There are different ideas being bounced around Congress and even the White House is sending contradictory signals.

President Donald Trump has suggested he dislikes the idea of a broad border adjustment on foreign companies and favours narrow tariffs on certain imports _ but then he has also made more favourable comments about the adjustment idea.

Freeland said she leaves Washington sensing the plan is far from settled.

”The conversation … is very much just at a beginning,” she said. ”How it might work, and what it might include, and whether tariffs might be a part of it, is very much all under discussion. …

”All very, very preliminary. … So we do not know what the position of the United States might be.”

Freeland’s main takeaway from two days of meetings was actually quite encouraging. She said everyone she spoke with viewed Canada as a model trading partner, with balanced trade, and comparable labour standards.

She said she kept getting the same positive response, whenever she raised the importance of Canadian trade for U.S. jobs: ”I really felt I was pushing on an open door, with everyone.”

One thing Freeland would not discuss in detail: NAFTA negotiations. She noted that the U.S. Senate has not yet confirmed the key cabinet members who will be involved in the file, the secretaries of commerce and trade.

As the countries prepare for the talks, Freeland said she has begun consulting Canadian industry stakeholders, meeting over the last few days with representatives from the auto and lumber sectors.

She visited Capitol Hill on her first day in Washington for meetings with top House lawmaker Paul Ryan and Senate foreign affairs power-brokers John McCain and Bob Corker. On her second day, she went to the State Department to meet the new Secretary of State, Rex Tillerson.

She said Tillerson knows Canada well—the former Exxon boss was heavily involved in oilsands projects.

Freeland called that familiarity a benefit for Canada. As she sat down to meet Tillerson, she mentioned his reputed knowledge of Canada. He chuckled and replied: ”Been there a few times, indeed. Indeed.”

Meanwhile, Justin Trudeau could soon be making his third visit to Washington as prime minister. Officials in both countries said plans are being discussed for a possible meeting with Trump within days, although the specifics haven’t been nailed down.

”I will have further updates on the prime minister’s schedule, either later today or tomorrow,” White House spokesman Sean Spicer said Wednesday.

”I’m not in a position where I can finalize that.”

Sources familiar with planning for the event say the Canadian side is determined to set specific objectives for the first Trump-Trudeau meeting, so that the countries can start making progress on key priorities, rather than just make it a social visit.

The back-and-forth over agenda items has delayed the meeting.

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