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Trump’s trade war prompts threats of retaliatory tariffs, questions about the future of NAFTA

Council of Canadians honorary chairperson Maude Barlow has tweeted, “US has launched trade war. In effect killed WTO and NAFTA.”

She adds, “Trump’s trade war has effectively killed NAFTA. He would not participate in a Chapter 19 challenge or abide by a trade ruling. NAFTA is dead.”

Barlow’s tweets follow the news the United States will impose steel and aluminum tariffs on Canada and Mexico (as well as the European Union) effective at midnight tonight. The Toronto Star reports, “The official justification for the tariffs is national security. The Trump administration, however, made it clear that the president is actually acting because the talks over NAFTA have stalled.”

A Maclean’s article has previously explained, “Chapter 19 allows Canada to bypass the U.S. judicial review process when the U.S. government imposes antidumping and/or countervailing duties on Canadian products imported into the United States… In such cases, Canada can use NAFTA’s Chapter 19 to create an independent, binational panel of five arbiters, agreed upon by both parties, who will determine whether or not the duties have merit based on U.S. domestic laws. A separate process can be pursued at the World Trade Organization to determine whether the duties are in accordance with WTO rules as well.”

If the Chapter 19 panel or WTO process were to find the duties lacked merit, then they would have to end. From the beginning of the NAFTA talks, the Trump administration has wanted to strike Chapter 19 from NAFTA.

This afternoon, Prime Minister Justin Trudeau spoke to reporters and called Trump’s move on steel and aluminum tariffs “totally unacceptable.”

He also tweeted, “Canada will also challenge these illegal & counterproductive measures under NAFTA Chapter 20 and at the WTO.”

(Chapter 20 is the state-to-state NAFTA dispute process – where a government can allege that another government is not complying with its obligations under NAFTA. The Trump administration’s position in the NAFTA talks has been to argue that the Chapter 20 provision should be made strictly advisory.)

And CBC now reports, “Foreign Affairs Minister Chrystia Freeland said Canada is hitting back with duties of up to $16.6 billion on steel, aluminum and other products from the U.S., including maple syrup, beer kegs and whiskies.” The Toronto Star further notes, “They will hit not only steel and aluminum products but dozens of others, from soup to boats to toilet paper to playing cards.”

CNBC adds, “Mexico, the third largest U.S. trade partner, said it would penalize U.S. imports including pork bellies, apples, grapes, cheeses and flat steel.”

No NAFTA talks are planned at this point, but US president Donald Trump will be meeting with Trudeau at the G7 summit in La Malbaie on June 8-9 (though National Post columnist John Ivison writes, “The fear in Ottawa is that the tariffs will create such a hostile environment for Trump in Charlevoix that he may not even show up.”).

Council of Canadians trade campaigner Sujata Dey says, “We encourage the Trudeau government to have resolve on this issue and to stand up for Canadians, not just over steel and aluminum tariffs, but for the environment and the kind of society we want to live in. We continue to call for Chapter 11, references to water and energy proportionality to be removed from NAFTA.”

For now, the Trudeau government will be soliciting public comments on the tariffs it intends to impose on the United States and says that those tariffs will come into effect on July 1 if the U.S. does not drop its tariffs on steel and aluminum.

Ivison adds, “Surreal as it may seem, Canada is about to engage in a trade war with the United States.”

The Council of Canadians is closely following this developing situation.

Further reading
Unifor supports full retaliation against U.S. tariffs