Politics

Trump's steel tariff could drive up Canada's military procurement costs

A move by the Trump administration to slap tariffs on Canadian steel would have a boomerang effect on Washington and drive up the cost buying military equipment for both countries, newly released documents show.

The policy also could undermine American contractors' Canadian market share

President Donald Trump speaks at a White House event Thursday, March 1, 2018, in Washington. Trump's threatened steel tariff would drive up the cost of Canada's military purchases. (Evan Vucci/The Associated Press)

A move by U.S. President Donald Trump to slap tariffs on Canadian steel would have a boomerang effect on Washington and drive up the cost of buying military equipment for both countries, newly released documents show.

Alarm bells started ringing months ago at National Defence over the notion that the U.S. Commerce Department might impose import duties.

Defence Minister Harjit Sajjan was briefed about the perils last spring, shortly after the Trump administration initiated an investigation.

Such measures would be a threat to the unique relationship between the two countries, which "share the most integrated defence industrial base in the world," said a 12-page briefing note obtained by CBC News under access to information legislation.

American market share in jeopardy

It warns of "increases" in the cost of defence hardware — which, in some cases, is already astronomically high.

Not only would U.S. defence contractors face higher prices for what they build and sell to the Pentagon, their market share in Canada would be in jeopardy.

"The Government of Canada buys more military hardware from the U.S. than anywhere else, promoting interoperability and security of supply," said the May 12, 2017 assessment.

Then-Minister of National Defence Gordon O'Connor (centre) poses for a photo with Lt.-Gen. Angus Watt, Chief of the Air Staff (left) and Josee Verner, Minister of International Co-operation in front of a recently-purchased C-17 Globemaster III strategic lift aircraft at the Abbotsford International Airshow in Abbotsford, Saturday, August 11, 2007. (Richard Lam/Canadian Press)

"The Canadian government purchases significant defence goods and services from the U.S. ($1.44 billion annual average). Accordingly, any significant cost increase on U.S. defence end products could limit imports to Canada."

President Trump announced a major new 25 per cent tariff on steel imports and a 10 per cent duty on aluminum.

Those measures are to be implemented next week and are meant to boost U.S. manufacturers — the latest front in Trump's trade war.

'Absolutely unacceptable'

Details on whether all countries — including Canada — will face the same steep tariffs have not yet been released.

Foreign Affairs Minister Chrystia Freeland played the defence cooperation card in responding to the news out of the White House.

"As a key NORAD and NATO ally, and as the number one customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable," Freeland said in a statement.

"Any restrictions would harm workers, the industry and manufacturers on both sides of the border. The steel and aluminum industry is highly integrated and supports critical North American manufacturing supply chains. The Canadian government will continue to make this point directly with the American administration at all levels."

The briefing for Sajjan last spring went even further, expressing the dismay with which senior officials greeted the prospect of steel imports being sucked into the growing trade fight.

"It's hard to believe that imports from Canada could be considered a threat to U.S. national security," said the briefing document.

Highly integrated market

"Any conclusions that imports from Canada threatened U.S. national security interests would ignore the unprecedented alliance we have."

In its submission to the U.S. Commerce Department last spring, Canadian trade officials underlined how highly integrated the American and Canadian steel and aluminum markets have become.

"The U.S. sells more iron and steel to Canada than it buys — more than $2.1 billion," said the submission.

"Canada is the number one destination for U.S. steel exports … The balance of trade clearly favours the U.S."

ABOUT THE AUTHOR

Murray Brewster

Defence and security

Murray Brewster is senior defence writer for CBC News, based in Ottawa. He has covered the Canadian military and foreign policy from Parliament Hill for over a decade. Among other assignments, he spent a total of 15 months on the ground covering the Afghan war for The Canadian Press. Prior to that, he covered defence issues and politics for CP in Nova Scotia for 11 years and was bureau chief for Standard Broadcast News in Ottawa.

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