Canada Retaliates To U.S. Tariffs On Steel And Aluminum

As of midnight on May 31, the Trump administration revoked the exemptions to the U.S. ad valorem tariffs on imports of steel and aluminum previously granted to Canada, the EU, and Mexico. In a swift response following the U.S. announcement, Canada (as well as the EU and Mexico) declared its intention to impose retaliatory tariffs against U.S. exports.

President Trump imposed the tariffs through presidential proclamations under an obscure provision in U.S. domestic law, Section 232 of the U.S. Trade Expansion Act of 1962. The chosen legal mechanism is irregular and trade experts question its application given the requirement that true national security risks exist. WTO Agreements permit application of protective tariffs under other conditions, including dumping, subsidization, and import surges, but the U.S. government has chosen to take the Section 232 route which is not burdened by the rigor of as many procedural steps and satisfaction of legal conditions (other than security risk). "National security" in the U.S. usage includes the "general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements, which are critical to minimum operations of the economy and government."

The move naturally seen by the Canadian government as an aggressive tactic by the United States to pressure its trading partners into making trade concessions, notably with respect to Canada and Mexico in the NAFTA renegotiations. Canada's Minister of Foreign Affairs Chrystia Freeland described the U.S. tariffs as a "specious and unprecedented use" of the Section 232 national security exemption.

The list of U.S. products proposed to be subject to Canadian retaliatory measures is available on the Department of Finance website. These are "dollar for dollar" countermeasures on similar categories of U.S. steel and aluminum products as the Canadian products targeted by the United States, as well as 71 categories of other industrial and consumer goods. The collective value of imports of the targeted products is C$16.6 billion (US$12.8 billion) per year, which is approximately the same value as Canadian steel and aluminum exports to the United States affected by the U.S. tariffs. Minister Freeland described it as the strongest trade action Canada has taken in the post-war era.

The Canadian government is currently seeking public input on or before June 15, following which the government may modify or expand the list. July 1 is the...