Trump warns of retaliation against Canada over dairy

WASHINGTON: Trade tensions between the United States and Canada ramped up Tuesday after US President Donald Trump threatened to retaliate against the US neighbor for additional restrictions it imposed on US dairy products, hours after Washington rekindled an old trade conflict by slapping new tariffs on Canadian softwood lumber.

"Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump declared on Twitter.

It was another in the administration's aggressive shots at close trading partners, and came not long after the US Commerce Department announced it was imposing tariffs of as much as 24 percent on Canadian softwood lumber, which it says is improperly subsidized.

The US Dairy Export Council said Canada's new national pricing policy for milk "blatantly blocks American dairy exports," and is forcing dozens of dairy farmers to find new customers by May 1. The group urged Trump to "take immediate action."

The new pricing policies were extended to apply to ultrafiltered milk, which is used in cheese production, and "will enable significant dumping of Canadian dairy products onto the world market," the group said in a recent statement.

In its annual report on trade issues last month, the office of the US Trade Representative said it remained concerned about Canada's supply management system for dairy products and the possibility of additional limits on US exports. It said it "continues to monitor closely any tariff reclassifications of dairy products to ensure that US market access is not negatively affected."

- 'Unfair and punitive' -

In the long-standing lumber dispute, the Commerce Department announced late Monday that after talks failed to yield an agreement, it would impose "countervailing duties" of between three and 24 percent on softwood lumber, used for flooring, siding and other products.

Officials in Canada, the second most important US trading partner, rejected claims of subsidies.

"Canada disagrees strongly with the US Department of Commerce's decision to impose an unfair and punitive duty. The accusations are baseless and unfounded," Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr said in a statement.

Canada "will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation," it said, adding that it has prevailed in international tribunals on the issue since 1983.

The softwood lumber dispute between Washington and Ottawa has seen many twists and turns for nearly 35 years, with US producers accusing their Canadian counterparts of exporting lumber at subsidized prices, harming American businesses.

The Commerce Department said softwood lumber imports from Canada last year totaled $5.66 billion. The US is British Columbia's largest market for the wood products, with $4.6 billion in softwood lumber exported from the province last year.

Producers north of the border reacted furiously to the ruling.

"These duties are unwarranted, and this determination is completely without merit," said Susan Yurkovich, president of the British Columbia Lumber Trade Council.

"The allegations made by the US lumber lobby are the same arguments they made in prior rounds of litigation, all of which were rejected and overturned by independent NAFTA panels," she said, calling US interests "protectionist" looking "to create artificial supply constraints on lumber and drive prices up."

"This is not our idea of a properly functioning Free Trade Agreement," Ross said, adding that he "tried to negotiate a settlement but we were unable."

The Commerce Department said it will conduct a thorough investigation and confirm its position on the lumber tariffs by September 27. If confirmed, the tariffs would then have to be approved by the US International Trade Commission.

The Canadian officials said Ottawa "has put forward a number of reasonable proposals to the current US administration that is responsive to views expressed by US industry."

"We remain confident that a negotiated settlement is not only possible but in the best interests of both countries."

Canada, Mexico and the United States are part of the North American Free Trade Agreement. However, Canadian softwood exports are regulated under a bilateral agreement reached in 2006, which expired in 2015.

President Donald Trump, who took office in January, spent much of his campaign blasting the NAFTA agreement and stating that he would renegotiate it to get a better deal.