Canadians' pride mixes with retaliatory tariffs. Just add tomato paste

The workers Trudeau is visiting will be in the middle of this fast-escalating trade war.

The White House’s use of a national security argument to justify the duties against a close ally, along with President Donald Trump’s repeated belittling of both Trudeau and his trade policies, has offended and angered Canadians. On social media, they are calling for boycotts of U.S. products and encouraging one another to look elsewhere for vacation destinations. Trudeau’s decision to retaliate won a rare endorsement from all three of Canada’s major political parties.

“We’re living in a brand-new world,” said Debra Steger, a law professor at the University of Ottawa who is a former senior trade negotiator for Canada and a onetime official at the World Trade Organization. “It has been pretty messy, and it’s not going to get better soon. We really are in a very difficult time.”

The Canadian government said in a statement Friday that it had reached out to Robert Lighthizer, the U.S. trade representative, six times this past week in a final bid to resolve the tariff dispute. On Friday, Trudeau also spoke with the president about Canada’s decision to retaliate. Those efforts, as well as Trudeau’s earlier attempts to win over Trump and his advisers, proved unproductive.

With the Canada Day tariff, the country is joining China, Europe and Mexico, among others, in retaliating against U.S. duties. Early this year, Canada also filed a sweeping complaint at the World Trade Organization about the Trump administration’s “America First” approach. And, talks to renegotiate the North American Free Trade Agreement, which reshaped Canada’s export-driven economy, appear to have stalled.

Adding to concerns about escalation, Trudeau and his officials have vowed further action if the White House follows through with threatened duties on Canadian-made autos and auto parts. They are the keystone of Canadian manufacturing and have been covered by various trade agreements with the United States for more than 50 years. Similarly, Lighthizer vowed Tuesday to “take all necessary actions” against countries retaliating against U.S. trade actions.

Like many in Canada, Trudeau seems at a loss when it comes to Trump’s motive for turning the United States’ neighbor and largest trading partner into a target.

“I’m not in a position to opine on motivations of the president,” he said at a recent news conference. “I’m going to stay focused on the relationship that we’re building, on defending Canada’s interests, on looking for ways to further push the benefits of improving and modernizing NAFTA.”

The prime minister will appear via video at Canada Day festivities at Parliament Hill in Ottawa while attending a party outside the former Heinz plant in Leamington, Ontario, the self-proclaimed tomato capital of Canada. After Heinz said it would close the plant in 2013 and shift most of its production to the United States, the factory was revived by a former Heinz employee.

Now known as Highbury Canco, it is a contract manufacturer for Heinz and several other food companies. Tomato paste from the plant is used by French’s to make ketchup that the company promotes as a Canadian alternative to the imported Heinz condiment, which is one of Canada’s retaliation targets. Its 560 employees also make tomato sauces for several companies that will benefit from Trudeau’s tariffs.

But the plant’s savior, Sam Diab, who is president and chief executive of Highbury Canco, said the trade battle was not all good news. The new Canadian tariffs will also affect the price of steel cans, bottle caps and jar lids he imports from the United States and for which there is no viable alternative source in Canada.

More worrying, Diab said, are the broader implications for the company, which also exports to the United States.

“I don’t think it’s an environment anybody really likes, the uncertainty,” he said. “We’ve operated and succeeded in a free-trade environment, and in a closed market we could probably adapt. It’s this in-between situation — that’s the problem.”

The list of Canadian tariffs includes aluminum and steel in various forms. But it also targets a wide variety of consumer products from U.S. states that the Canadian government believes are important to Trump’s political fortunes. For example, chocolate bars, which largely come from Hershey in Pennsylvania, are on the list.

For other items, like “odoriferous preparations used during religious rites,” the political significance in the United States is unclear.

The government said it had created its list to include only products for which alternatives made in Canada or third countries are readily available. Some industries, however, dispute that.

Peter Hanna is a regional sales manager in Shawinigan, Quebec, for Regal, a motorboat maker based in Orlando, Florida. He said he met Tuesday with François-Philippe Champagne, the international trade minister, to deliver the message that his dealers in Quebec and other Atlantic provinces rely on U.S. companies for 95 percent of their boats and that Canada’s relatively small boatbuilding industry cannot replace that supply. (The Canadian pleasure-boat industry’s trade group estimates that across all categories of boats, it gets 65 percent of what it needs from U.S. builders.)

“I made it loud and clear: They can’t supply all of our dealers. It’s impossible,” said Hanna, who once led a large Canadian boat maker, Doral, that succumbed to the combination of free trade with the United States followed by an economic slump in 1990.

Despite the possible effects on his industry, Hanna backs the government’s decision to retaliate. “It’s right not to get pushed around,” he said. “But you’ve got to pick your spots.”

In addition to the tariffs, Trudeau’s government said Friday that it had set aside up to 2 billion Canadian dollars (about $1.5 billion) for assistance to the steel and aluminum industries. It will take a variety of forms, including loans, worker restraining and programs to help reduce layoffs.

Clifford Sosnow, a trade lawyer in Ottawa who previously worked for the foreign affairs department and the Canadian International Trade Tribunal, said it was impossible for Canada to inflict significant economic pain on a neighbor about 10 times its size. He compared the Canada Day tariffs to “a pinprick.”

Steger, the law professor, agreed. She added that if the tit-for-tat escalated, Canada would soon run out of products to target without bringing widespread price increases for Canadian consumers — and potentially a political cost. But its current tariffs, she said, will be amplified by the actions of other countries.

The Canada Day retaliation, Sosnow said, appears largely intended for the home crowd more than for the White House. “The prime minister needs to be seen to be responding,” he said.

But he said it remained unclear to him exactly what Canada’s plans were for ending the tariffs and, more important, reaching a new NAFTA deal.

And if Trump takes on the auto industry, sparking another round of retaliation, the threat to Canada’s economy will become even more perilous, Sosnow said.

“This is a high-stakes game,” he said. “We run the risk of going back to power-based trade rather than rules-based trade. With power-based trade, smaller economies like Canada will hurt.”

This article originally appeared in The New York Times.