An Angry Canada Responds To Trump's Lumber Tariff... And What It Means For The Economy

Tyler Durden's picture

After last night's announcement of ~20% tariffs on softwood lumber imported from Canada, Prime Minister Justin Trudeau lashed out at the Trump administration saying the U.S. could suffer from a "thickening" border as trade tensions between the two countries escalated, sending the Canadian currency to a 14 month low.

As a reminder, the United States announced it would impose preliminary anti-subsidy duties averaging 20 percent on imports of Canadian softwood lumber, Commerce Secretary Wilbur Ross said on Monday, escalating a long-running trade dispute between the two neighbors. The move, which affects some $5.66 billion worth of imports of the construction material, sets a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.

Speaking to a technology company in Ontario, Trudeau said he would defend the national interest: "standing up for Canada's interests is what my job is, whether it's softwood or software," Trudeau said, prompting applause and cheers.

"You cannot thicken this border without hurting people on both sides of it. Any two countries are going to have issues that will be irritants to the relationship and, quite frankly, having a good constructive working relationship allows us to work through those irritants."

Elsewhere, Canada's Natural Resources Minister Jim Carr said the U.S. move to set tariffs on softwood lumber shipments are an “unfair and unwarranted trade action.”  Speaking to reproters in Ottawa, Carr said that Canada is looking at an aid package for lumber industry and workers which could up to $300 million, and added that a court challenge of duties is possible, and that Canada has won all of those cases in the past.

Carr also said free trade is in the best interest of both nations: "There are irritants in the trading relationship, they aren’t new."

Canada's Liberal Party leader says the two countries are economically interconnected, but it's not a one-way relationship. He said that millions of U.S. jobs depend on smooth flow of goods, services and people back and forth across the border. The Prime Minister also vowed to stand up for Canadian interests after Trump's decision sent the Canadian dollar to a 14-month low.

Yet while the currency fell, shares in Canadian lumber companies rose as the level of the new tariffs came in at the low end of what investors were expecting. Shares in West Fraser Timber, which would pay the highest duty rate of the affected companies, rose 5.6 percent to C$59.50 and the Canfor stock gained 3.5 percent to C$18.82. The average 20 percent anti-subsidy duties announced late on Monday compared to a 20-30 percent range expected by RBC equity analysts.

As Reuters adds, softwood lumber joins dairy as a key target for U.S. President Donald Trump, who tweeted a new attack on Canada's supply management system for dairy on Tuesday. Last week the president called Canada's dairy protections "unfair." "Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump tweeted Tuesday morning.

* * *

So what does Trump's announcement mean for the Canadian economy? Here is a summary of the key takeaways from a BofA note on the escalating trade war between the US and Canada.

  • Trade uncertainty back to the forefront after US announced preliminary duties on Canadian softwood lumber exports.
  • The announcement on tariffs was accompanied by negative comments regarding NAFTA, which may herald NAFTA renegotiation.
  • Downside risks to growth intensify as higher tariffs lower exports and higher uncertainty delays investment.

And the details:

Trade uncertainty back to the forefront

US wants to renegotiate NAFTA

The US is likely to open the North America Free Trade Agreement (NAFTA) for renegotiation and is willing to use tariffs to contest what it considers unfair trade. This has been our long standing view, but we  got clear evidence that the US will be very active on the trade front after Wilbur Ross, US commerce secretary, announced on April 24th the imposition of preliminary duties of almost 20% against Canadian  softwood lumber exports. Ross said that the US is using countervailing duties after it was “not able to achieve a fair result” through negotiation with Canada. He said that Canada benefits from a provision in NAFTA that allows Canada to supersede US sovereignty.

Downside risks to Canadian growth

The imposition of countervailing tariffs along with the comments on NAFTA increases uncertainty regarding trade policies for the North America region, which will likely delay investment. Although we believe that Canada is not the main target of US anti-trade policies, it is certainly very exposed to US trade. Higher tariffs will have a negative impact on production in the Canadian lumber industry (Lumber exports  are almost 1% of Canadian GDP). Growth in Canada has been surprising to the upside, in line with our more constructive view of the economy. But the likely renegotiation of NAFTA and an active US trade policy put downside risks on our 2.3% GDP growth expectation for 2017.

Renegotiation of NAFTA is positive, but…

We expect the US to send a notification to open NAFTA for renegotiation soon. That will open a 90 day window for countries to prepare. Any renegotiation is likely to be lengthy, going well into 2018. And an institutional renegotiation of NAFTA has a good chance of ending with an updated agreement that benefits the region by incorporating new sectors into the treaty (e.g., energy, ecommerce). Consider the TPP blueprint that the staffs of the three countries involved had already agreed on as a starting point. But in the meantime uncertainty will likely be high as countries take different postures or even actions such as the impositions of tariffs to improve their leverage. The risk is that it all ends in a trade war, although the strength of the value chains in North America makes the latter an unlikely scenario, in our view.

Back to dovish BoC

The increase on trade uncertainty will be highlighted by the BoC, which will support our strategists’ view of a weaker CAD, in our view.

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PrayingMantis's picture

 

... careful, Justin might just hit you with his handbag ...

 

fleur de lis's picture

Trudy should stick to gay parades and leave governance to the grownups.

 

shamus001's picture

What with all of the terrorist your importing into Canada... PLEASE thicken that border!

Primal's picture

Yeah, he was a bouncer too...I heard he let everyone in.

directaction's picture

What a fruitcake. Typical Canadian limp-wristed wimp. 

tradingdaze's picture

Trudeau "Make Canada Adequate Again"

Being from Canada I, and many others, would like to switch leaders.

 

Jlasoon's picture

Well Trump might give you your wish. Because the economic ass-rape coming to Canada is about to be severe. I'm not sure Trump cares about the WTO lol

HRClinton's picture

Canada has leaders?  Who knew?

I thought you only had nice goys.

SRV's picture

Really...

This is from his fighting days... you gonna say that to his face... lol!

https://www.google.ca/search?q=justin+trudeau+martial+arts&hl=en&site=we...

Metastatic Debt's picture

Nose still intact.  Not hard-core fighting. Lots of pics with fat head gear on.

I sparred in a MMA place before there was the term "MMA". Use to call it "Cage Matches". They tried to out-law it in Chicago. Only Cathloic gyms would allow the amateur matches. Go figure.

Every one of the ugly m-fs I knew that had the stones to climb the ropes had some form of head deformity - ears, eyes, nose, forehead all caused by the no head gear fights.

On weekends the guys would go to bars to have some training with bouncers and bikers. They didn't always win, but they knew how to fight. Which also might have lead to the rearangement of their fair features...

 

 

Metastatic Debt's picture

4 years of Trump Fight Club will have that cream-filled-frenchy-pastry-puff-pretty-boy growing a couple. If this goes on long enough, maybe the sack will sprout hair.

We can bury the 20% timber costs in our flip-trade housing market.

 

 

Sunni Ways's picture

So Rusty Trump is concerned that lumber imports are subsidized. Now he adds a tarif and the Cdn $ go's for a shit - ergo, ALL imports are subsidized.
Well played Donald, well played.

TAALR Swift's picture

Does Canada have any missiles or nukes?  No?  How about a Maple Syrup Ballista?

What can they throw - besides a hockey game?

Pity.  The important thing is, that they're all nice.  One must always be nice to everyone, no matter what. Unless they are Russian or Iranian.

Joyo Bliss's picture

PET and Maggie named him Justin because of his tiny dick. (Just in.)

All kidding aside ... Justin ... move aside already! Let's get a PM that speaks real words. WTF Does a "thickening border" mean? Jesus.

Let's just sell our softwood to the UK and Iceland. Fuck all for trees over there.

SgtShaftoe's picture

Welcome to the party guys. Maybe Canada can help us get rid of the deep state.

knukles's picture

LOL
Trudeau helping to rid mankind of the Deep State.
When Canadian PM's quit playing with themselves.
Where the hell do all these political families come from.... like crime syndicates

.... oh wait ....

lik1999's picture

Imagine if Russia interfered in this energy trade dispute...

 

Canadian Maidan? 

tripletail's picture

Relax, Canada. Trump will flip-flop in the near-term. Guaranteed!

perkunas's picture

Its not flip floping when its planned in the 1st place, Trump has a High IQ,  the problem is most of us do not.

Primal's picture

Most people are collectivists, they don't fully use their rational brain.

rejected's picture

Yep,,, He pulled off a very good sting.

And the marks still don't know.

jal's picture

So what does Trump's announcement mean for the USA economy?

20% or 50% will be paid by Americans.

Sounds about right.
Just like the Mexican border tax.

musimann's picture

Canada says they will respond by taxing Trump for the Mexicans fleeing to Canada. Or by imposing three years of forced labor in shale pits.

Oldwood's picture

The price is not nearly as important as our ability to pay. Typically prices are at their lowest when we are least able to pay. We had some pretty low prices back in 08/09 and I heard very little celebration. Look at I our current economic circumstances and what we have done to ourselves simply because we only discriminated by price and not economic effect. 

ALL actions have consequence.

Bill of Rights's picture

When this Global bull shit implodes this time around its gonna be epic. I suggest the extra large popcorn folks...

shamus001's picture

On 15-18, as a War Time vet, fairly armed at home, and a great many other war vets  I know, are quite the Anti-War type.  They've seen the horrors of war, they've experienced the bullshit and many cases "for nothing" the beauracratic game that is played with the lives of friends and family.  I think you misjudge us.  Please consider that nothing is black or white, and just as 50% of this nation was deluded enough to vote Hillary, that doesnt disclude the other 50% 

hedgeless_horseman's picture

 

I think you misjudge us. 

I pray that you are correct, sir.

Unfortunately, it is truly more of an observation than a judgment on my part.

The next time you encounter a group of veterans, simply ask for a show of hands when asking them...

"How many of you support the war in Afghanistan, Iraq, and Syria?"

When everyone of them proudly raises his hand, be brave, and ask them why.

Peace!

sidfalco's picture

"thicken the border" - what the fuck does that mean? Is that twat Trudeau on the weed?

Primal's picture

US putting another condom on.

ToSoft4Truth's picture

"The US is likely to open the North America Free Trade Agreement (NAFTA)"

 

Trump is really going to sock it to us this time.  You know he wants low-cost hotel help from the Caribbean. 

perkunas's picture

Trudeau wants a weed wall.

Jack's Raging Bile Duct's picture

Wait. The TPP stipulations are supposed to be a starting point for renegotiating NAFTA? That's incredible thing to write anecdotately at the end of an article.

FUCK THAT.

perkunas's picture

Trump put the guy that wrote TPP in charge of negotiating NAFTA, you cant even makes this stuff up.

In.Sip.ient's picture

Draining the swamp... eh???

 

LOL!!!

 

koan's picture

Canada is well on the way to becoming a Muslim country on our Northern border, I can't imagine this lumber deal being any where near as bad as that.
I think the US well happily accept all the white people that want to leave though.

MrGalt's picture

So long as Trump is president, perhaps. But get another progressive in the WH and we all be living on an island in the middle of Lake Erie.

cherry picker's picture

Canada is a sovereign nation, not beholding to USA or UK or anyone else.

We enjoy good relations with Americans and other peoples in the world, but when these ass wipes like Trump and his cronies come along and bribe or threaten Canadian politicians into doing their bidding, he is stepping over the line big time.

Donald Trump can go back to his hotels and golf courses and brag about how great he is to his billionare friends and billionaire wannabees, but as a human being he doesn't impress or scare me one bit.

 

ToSoft4Truth's picture

Did you just glove slap Trump across the face?

Anybody's picture

"Canada is a sovereign nation"

Since when? I must have missed it.

joeyman9's picture

Sovereign Nation my ass.  Wasn't your legislature suspended by the Queen's Representative TWICE!!!! in the last decade?  (yes it was).  You are subject to the crown, not that that's all bad; at least you're have the benefit of being a member of the commonwealth which provides ease of travel to an awful lot of countries.

Maxter's picture

We jailed the queen representative not so long ago. That's sovereign enough for me

Redhotfill's picture

Soveriegn Whats that all aboot eh?  LOL!  They are a Crown Colony Corporation that's why they have a "Govenor General"  He's the dude who  act's on the Queen's behalf.  He can send Parliament home, Veto ANY LAW the Queenie doesn't like.  So yeah Soveriegn LOL!

bluskyes's picture

One nation united under the crown, beholden to the banksters.

U4 eee aaa's picture

Actually, we are subject to the queen. She just hasn't pulled rank yet. Charlie might if he gets his hands on the golden stick

HRClinton's picture

You had me cracking up at "Canada is a sovereign nation, not beholding to USA or UK or anyone else."

Good one.  You must be related to Mike Myers or Jim Carey.

83_vf_1100_c's picture

"Canada is a sovereign nation, not beholding to USA or UK or anyone else."

The Queen of England is on your money. Half of your citizens speak French. Seems like some outside influence.

 

VZ58's picture

Hey cherry picker...as a fellow Canadian I must say you sound like a complete idiot with your braggadocio. We are going to get our a**es  fu**ed economically in this country. I remember the days of 60 cent dollar. Oh yeah, good times ahead. Are you really this stupid?