The U.S. and Canada are locked in another tariff war barely a month after a major North American trade pact took effect, flummoxing carmakers who would prefer to let the deal play out and brewers who say the standoff will raise costs during challenging economic times.
President Trump said he is protecting American workers by imposing a 10% levy on some aluminum products imported from Canada. His action Thursday could benefit top U.S. aluminum producers, underscoring the Trump campaign’s “America First” message as the president competes with former Vice President Joseph R. Biden for the votes of blue-collar workers on Election Day in three months.
But the tariff dispute erupted just weeks after the U.S., Mexico and Canada reached a hard-won agreement to cut red tape and integrate their economies. Canadian officials pledged retaliation, raising the specter of higher costs for cans of beer, air conditioning units, washing machines and other products.
“The timing is just terrible. The USMCA trade agreement is barely a month old, the economy is fresh off the worst quarter in American history and here comes a tax increase on something everyone uses. It makes no sense politically, let alone economically,” said Ryan Young, a senior fellow at the Competitive Enterprise Institute.
Jim McGreevy, president and CEO of the Beer Institute, said the tariffs will result in higher costs for brewers during an economic downturn.
“For the beer brewer, I can tell you actions like yesterday’s raise the cost of production,” he told The Washington Times on Friday. “And aluminum is the single-highest input cost [for breweries].”
The U.S. imposed tariffs on Canadian steel and aluminum in 2018, kicking off a tit-for-tat exchange. The countries lifted the levies last year to clear the path for negotiations to create the United States-Mexico-Canada Agreement.
The president said last week that Canada is violating its side of the bargain.
“My administration agreed to lift those tariffs in return for a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all our aluminum jobs, which is exactly what they did. Canadian aluminum producers have broken that commitment,” Mr. Trump told factory workers Thursday during a stop in Ohio, a must-win state in November.
He said U.S. Trade Representative Robert Lighthizer looked at the data and said the decision to reimpose the 10% tariff was justified.
Analysts said U.S. imports of unalloyed aluminum jumped in recent months, but mostly because of depressed prices during the peak of the COVID-19 outbreak.
Critics say the White House is overreacting.
Clifford Sosnow, chairman of Fasken’s International Trade and Investment Group, said a closer look at the data doesn’t show a “flood” of Canadian imports.
“The president is looking at the last several months, at a COVID-related issue, and saying the sky is falling and we have a national security issue,” he said.
The Aluminum Association of Canada said monthly fluctuations resulting from market forces do not justify the change.
Jean Simard, the association’s president and CEO, said shipments of basic aluminum ingots rose because it was impossible to shut down smelters during a slowdown of separate aluminum shipments to carmakers, which were forced to shutter during the height of the pandemic. He called Mr. Trump’s tariffs an “electoral ploy” at odds with the spirit of the USMCA.
“It doesn’t make any sense. It’s an oxymoron. It’s a self-contradiction. There’s no market logic to what’s happening. It’s politically driven,” Mr. Simard said in a phone interview.
Canadian officials on Friday called Mr. Trump’s decision “ludicrous” and ill-timed and said they plan to hit $2.7 billion in American goods with retaliatory tariffs.
“These tariffs are unnecessary, unwarranted and entirely unacceptable. They should not be imposed,” Deputy Prime Minister Chrystia Freeland said. “Let me be clear: Canadian aluminum is in no way a threat to U.S. national security, which remains the ostensible reason for these tariffs. And that is a ludicrous notion. On the contrary, Canadian aluminum is essential for U.S. industry.”
She said Prime Minister Justin Trudeau is consulting with business leaders on a “long and detailed list” of products with aluminum so it can impose dollar-for-dollar reprisals within 30 days.
Ms. Freeland said the tariffs will exacerbate the fallout from the pandemic, which is hitting the U.S. hard.
“By imposing these tariffs, the United States has taken the absurd decisions to harm its own people at a time when its economy is suffering the deepest crisis since the Great Depression,” she said. “Any American who buys a can of beer or soda, or a car or a bike, will suffer. In fact, the very washing machines manufactured at the Whirlpool plant where the president made his announcement yesterday will become more expensive for Americans and less competitive with machines made elsewhere in the world as a result of these tariffs.”
Trade experts said people on both sides of the border will suffer as importers pass the costs of tariffs down the supply chain.
“The problem with retaliation is you end up shooting yourself in the foot,” Mr. Sosnow said. “At the same time, what you’re doing is causing harm to the ordinary consumer.”
Bob Pease, president and CEO of the Brewers Association, said the tariffs will increase costs for his members and create another headache in a tough year.
“It’s an additional straw that’s being added to the camel’s back. We’re in an economy where my members are seeing their revenues decline,” said Mr. Pease, whose trade association represents small and independent craft breweries.
It’s unclear how long the standoff will last.
Analysts say Mr. Trump is unlikely to back off before the election, and the main question is whether steel is implicated, too, a situation that would have an outsized impact on automakers.
The American Automotive Policy Council said last week that the administration “should let the USMCA’s groundbreaking steel and aluminum requirements achieve their intended effect, rather than reimposing tariffs on key trading partners.”
Ms. Freeland said she is confident that the steel trade between Canada and the U.S. is “balanced, reciprocal and mutually beneficial.”
“My policy with this U.S. administration,” she said, “is hope for the best, prepare for the worst.”