April 25, 2017 / 5:06 PM / 3 months ago

Trump finds a trade battle worth fighting

3 Min Read

U.S. President Donald Trump (R) listens to Canadian Prime Minister Justin Trudeau during a joint news conference at the White House in Washington, U.S., February 13, 2017.Carlos Barria

WASHINGTON (Reuters Breakingviews) - Donald Trump has found a trade battle that’s actually worth fighting. The U.S. president is slapping an average 20 percent duty on Canadian softwood lumber after decades of officials complaining of subsidies. The U.S. government has a good case for going after one of the nation’s closest allies.

Various administrations have long accused Canada of allowing loggers to cut down trees on public land. With lower costs, they can then sell the lumber at cheaper prices than U.S. rivals. The United States had imposed duties in 2002, until a 2006 deal halting them if Canada agreed to a quota and to pay a tax in lieu of a tariff. That expired in 2015 and the Obama administration had no luck reaching a new deal.

The preliminary tariff U.S. Commerce Secretary Wilbur Ross imposed on Monday will total about $1 billion a year. In 2016, the United States had a $5 billion trade deficit with Canada on sawmill products, which includes softwood lumber.

Canada intends to take the lumber dispute to the World Trade Organization. Such a case could take years to resolve, though. That leaves the NAFTA negotiations expected later this year as the most realistic venue to address this latest tariff. Canada expected an easy ride after Trump had said the North American Free Trade Agreement probably only needed “tweaks” during Canadian Prime Minister Justin Trudeau’s February visit. Since then, Canada’s trade barriers have come under fire, including the tariff of up to 270 percent it imposes on dairy products. Trump tweeted on Tuesday that “we will not stand for this.”

The stakes are high for Canada. It sends three-quarters of its exports to the United States, accounting last year for around $278 billion. Almost half of the province of Ontario’s GDP, 31 percent of Alberta’s and 23 percent of Quebec’s depends on trade with America. That gives Trump a good deal of leverage.

But loggers and dairy farmers have a lot of political clout in provinces like British Columbia and Quebec and in prior trade talks protested suggestions for creating more competition. And with the popularity of his Liberal Party falling behind the Conservatives in a March Forum Research poll, Trudeau cannot risk looking like he is being bullied on trade by the White House. Trump must be careful not to overplay his hand.

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