MNI: Canada Tariff Retaliation Seen Limited By Domestic Pain
MNI (OTTAWA) - Canada’s response to any U.S. tariffs will be restrained by the high cost of escalation, with officials focusing instead on boosting domestic growth by reviving stalled projects like energy pipelines, industry leaders told MNI.
Any export tariff "just punishes our industry, makes us less competitive," Mining Association of Canada president Pierre Gratton said in an interview.
Canadian miners import much of their equipment from the U.S. so tariffs would raise costs, he said. Americans will also pay more because metals such as copper don't have easy substitutes, he added.
Prime Minister Justin Trudeau says there will be a firm response to U.S. tariffs but hasn't spelled out whether that would mean acting on calls for going beyond dollar-for-dollar countermeasures to export taxes on energy and aluminum. In any case he's due to resign next month with former BOE and BOC Governor Mark Carney leading the contest to replace him. Conservative Leader Pierre Poilievre, leading in polls ahead of an election that could be called by the end of next month, has taken a similar stance about balanced retaliation.
"A global economic downturn brought about by a tariff war is obviously a concern, and the industry is concerned because this just doesn't make for good policy," Gratton said. "Tariffs may do harm to the global economy and lead consequently to less production and therefore less demand which could affect prices which could cause some mines to reduce output or close."
TOUGH TRADE-OFFS
Donald Trump wants to impose a 25% tariff on goods from Canada, together with a 10% levy on energy, and additional tariffs on aluminum, steel and autos. Trump has said that without U.S. support Canada would be better off as the 51st state, but most of those threats are on hold until March or April.
Such comments have pushed provincial leaders from Ontario and Quebec to say export taxes need to be examined as a way to check Trump's ambitions. Alberta and Saskatchewan premiers oppose going that far, and those divisions are one reason Canada will go slow, according to former Trudeau adviser Robert Asselin.
“For the national government it’s tough to make these trade-offs,” said Asselin, now senior policy adviser at the Business Council of Canada. “I hope we don’t have to go there.”
Risks of a trade war are clear even as polls show support for a tough stand. Canada sends 75% of its exports to the U.S. and the central bank and private economists say a major dispute would push the country towards recession.
THINGS CAN GO BADLY
Policymakers will offer more fiscal relief to struggling workers and could help with job creation by reviving projects like east-west energy pipelines, said Bea Bruske of the Canadian Labour Congress. Her group represents represents three million of Canada's 22 million workers and she met with Trudeau and provincial leaders earlier this month. Trudeau advanced one nation-building project Wednesday by announcing a high-speed rail line between Toronto and Quebec City, an idea that was stalled for decades.
The Bank of Canada must also avoid punishing households with high borrowing costs even as tariffs may further worsen the cost of living, Bruske said. “Keeping a lid on interest rates so that people can people can actually afford to live even at this baseline that we’re at right now is going to be critically important.”
Canada needs "measured approaches" to counter tariffs, she said, adding she believes export restrictions would be beneficial against Trump. “Counter-tariffs have to include decreasing the supply of things that they need like oil and gas, electricity, lumber, critical minerals,” she said.
Gratton at the mining group said "there's all sorts of potential for things to go badly" in any trade war.