Politics

Canada has taken in almost $300 million from retaliatory tariffs on U.S. imports

Experts warn consumers will be the biggest losers in President Trump's escalating trade war

September 11, 2018

A Dofasco employee looks at rolls of coiled steel in Hamilton Ont., Tuesday, March 13, 2018. (Tara Walton/Canadian Press)
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Canada collected nearly $300 million in surtaxes in the two months after it slapped U.S. imports with retaliatory tariffs.

Figures from the Canada Border Services Agency provided to CBC News show that in July and August 2018, surtaxes worth more than $286.5 million were charged on imports of American steel, aluminum and a variety of other goods, including handkerchiefs, coffee, icing sugar and sweetened or carbonated mineral waters.

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A spokesman for Finance Minister Bill Morneau said the money will be funnelled to Canadian industries hit by the Trump tariffs.

"We are committed to making sure that every dollar raised in reciprocal tariffs is given back in the form of support for affected sectors," said Pierre-Olivier Herbert.

U.S. President Donald Trump initially granted tariff exemptions to North American Free Trade Agreement partners Canada and Mexico, and to the European Union, but they expired June 1. The Department of Commerce, citing an obscure and rarely used clause in U.S. trade law that allows the president to impose tariffs on foreign imports that "threaten to impair the national security," extended the 25 per cent duty on steel and 10 per cent levy on aluminum to Canadian imports.

Canada hit back with "dollar-for-dollar" duties on up to $16.6 billion in imports of some steel and aluminum products and a long list of other goods, including beer kegs, whisky and toilet paper. Those tariffs kicked in July 1.

U.S. Customs and Border Protection told CBC that as of Aug. 28, the United States has assessed duties worth more than $1.8 billion on steel imports and $535.3 million on aluminum imports from suppliers around the world — but could not break down the amount charged to Canadian exporters.

With the cost of tariffs and counter-tariffs mounting, trade lawyer Cyndee Todgham Cherniak said consumers on both sides of the border will end up the losers.

"Importers will be paying more, whether it be 25 per cent or the 10 per cent. Importers will pass that cost on to the next person in the supply chain and eventually it will be the consumers that pay the increased cost," she said.

Todgham Cherniak called the Trump tariffs a "lose-lose proposition" that left Canada and other countries with no option except to retaliate. But the money could wind up changing hands again.

"If there's a challenge and these surtaxes were collected inappropriately, then it may very well be that the Department of Finance is going to have to refund those amounts to the importers who have paid them," she said.

"So the importers are going to get their money back, but the consumers aren't."

Extra safeguards considered

Morneau also is considering extra safeguards to protect the steel and aluminum industries against a surge in exports from countries looking for other markets due to the U.S. tariffs.

Consultations on those safeguards wrapped up Aug. 29 and the government is now weighing the input on its next steps to deal with what it calls "exceptional" circumstances.

Joseph Galimberti, president of the Canadian Steel Producers Association, said countries around the world are imposing their own safeguards through tariffs or quotas. He said Canada could consider a tariff beyond a quota that is based on past import patterns.

"If you throw on top of that fire the U.S. (tariffs), and now a series of cascading safeguards as diverted steel starts to make its way around the planet, to say 'exceptional' is really (understating) how disruptive, or how disrupted, the global market in steel is right now," he said.

Trade lawyer Brenda Swick said trade always goes through cycles of protectionism and globalism, and this U.S.-led jolt will cause widespread disruption to supply chains and impose added costs on consumers.

Consumer pays

"I think there will be an end to this, but in the meantime — until something changes in America, because America is the country that is causing this spiral — then countries are going to keep reacting and it's the consumer who pays," she said.

Some companies can absorb the added cost of tariffs temporarily, but they can't do that forever, Swick said — so the federal government must be careful about what it does with the tariffs collected.

"Finance has really got to think through the most advantageous ways, and what is the way that is in the best interests of Canada and consumers to decide how to allocate that $300 million or whatever they've collected," she said. "It's only going to get bigger."

Helping those adversely affected will be tricky, because anything that smacks of a subsidy could be challenged under trade laws.

Swick said she thinks the tariffs eventually would be lifted if there is a deal on NAFTA, but added Canada must prepare for prolonged duties.

"Coming to an agreement on NAFTA is a very good step towards getting rid of the tariffs, but it won't be overnight. I don't think you can expect Canada to have a NAFTA deal and tomorrow the tariffs are gone.

"The tariffs are going to be here for a while."

Trump also has threatened to impose tariffs on auto imports from Canada if NAFTA talks fail.

(Stefan Ataman/Shutterstock)
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