US President Donald Trump held talks with Canadian Prime Minister Justin Trudeau amid deteriorating relationship between the neighbour countries over lumber and dairy trade issues. The White House described yesterday’s telephonic conversation between the two leaders as very amicable.
“The two leaders discussed the dairy trade in Wisconsin, New York State, and various other places. They also discussed lumber coming into the United States. It was a very amicable call,” it aid in a statement. The conversation comes a day after the US Department of Commerce determined the need to impose countervailing duties of roughly $1 billion on Canadian softwood lumber exports to the US.
“This is not our idea of a properly functioning Free Trade Agreement,” US Commerce Secretary Wilbur Ross said, while describing it as as a bad week for the US-Canada relationship. Earlier in the day, Trump exuded confidence that the move would not result in a trade war with Canada. “No. They have a tremendous surplus with the United States. Whenever they have a surplus, I have no fear,” he told reporters.
“By the way, virtually every country has a surplus with the United States. We have massive trade deficits. So when we’re the country with the deficits, we have no fear,” Trump said in response to a question. During a White House news conference, Ross alleged that Canadian provinces subsidise lumber, which is used in housing construction in America.
“The (Canadian) provinces subsidise the cutting down of lumber — the technical term being stumpage — and then that lets them charge a subsidised low price when the product hits the US border. We have determined preliminarily that those problems, while they vary from one province to another, in some cases are as high as roughly 25 per cent, and on average are around 20 per cent. So they’re quite material items,” he said.
Ross said the preliminary decision that was put out imposes those countervailing duties on softwood lumber from Canada. “Those duties will be collected and they will be collected on a retroactive basis, going back 90 days, because it is 90 days ago that the Canadians were put on notice about this being an inappropriate process,” he said.
He said there is roughly $15 billion worth of softwood lumber used in houses in the US and about 31.5 per cent of that comes from the Canadians. “So that’s roughly $5 billion a year. A 20 per cent tariff on that is essentially a billion dollars a year. And the retrospective 90-day feature adds another $250 million to that on a one-time basis,” Ross explained.
Terming Canada as a close and important ally, he said it is generally a good neighbour but that does not mean they (Canada) don’t have to play by the rules. The commerce secretary did not rule out that there would be no impact of this trade ruling. “Well, everything relates to everything else when you’re trying to negotiate, so I can’t say there’s no impact. But what we have tried to do was to clear the air and get this dispute out of the way before the big NAFTA talks went on.
“That was not possible to achieve, and that’s why we went ahead and released the findings. There’s a feeling in the dairy industry that Canadians are a little bit abrupt in the action that they took the week before,” Ross said.
“The problem with dairy isn’t that they’re dumping dairy products in the US. The problem is the reverse, they’re prohibiting US dairy producers from selling their products in Canada, as a practical matter, and we’re looking into whether there are measures we can do to try to correct that,” he said.