Canada could be caught in the middle of a United States trade-war

Trudeau Hamilton 20180313

Prime Minister Justin Trudeau speaks with workers during a visit to Stelco Hamilton Works in Hamilton on Tuesday

In Pennsylvania, President Trump preened before an approving crowd as he trumpeted his decision to slap tariffs on aluminum and steel imports.

Trump may impose tariffs on $60 billion of Chinese goods, Reuters reported Tuesday, citing a source who had discussed the issue with the White House.

"By themselves, the tariffs on steel and aluminum will likely have a modest impact on growth and inflation", said Scott Brown, chief economist at Raymond James Financial in St. Petersburg, Florida. The weekend before the announcement, Ottawa was getting word that Trump was heavily leaning toward including Canada, largely because of concerns steel from China was coming into the USA from Canada.

The European Union's trade chief dismissed U.S. President Donald Trump's threat to impose tariffs on auto imports, and vowed to "stand up to bullies", adding to signs that a widening transatlantic rift over protectionism could escalate into an all-out trade war. Now priced at 18.8 times earnings, most analysts have U.S. Steel stock pegged for only mid-single-digits profits growth over the next five years - about 5.5% compounded, according to data from S&P Global Market Intelligence.

In a similar move observed locally, a tariff was applied by the president to Canadian imports of paper back in January.

The European Commission accused Trump of "cherry-picking" data to distort the debate in a transatlantic dispute that threatens to become a trade war. Most economists see losses to all sides.

"Europe is prepared", Dutch Finance Minister Wopke Hoekstra said Monday as he headed into a meeting with his counterparts from the rest of the euro area.

In Asia, a large share of Japanese and Chinese steel goes to countries in the region's southeast, where booming construction and light industries are fueling strong demand for steel.

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The EU says it's prepared to respond with "rebalancing" tariffs on about 2.8 billion euros ($3.4 billion) worth of US steel as well as farm and other products like peanut butter, cranberries and orange juice. The U.S. lost about 200,000 jobs, about 13,000 of which were in raw steel-making, by one estimate. What worries us is the ripple effect of the global trade row.

The Commission said it expected to be in contact with Washington over the metals tariffs this week, but that no formal talks had been scheduled.

The American brand at the centre of the current spat, Harley Davidson, sells thousands of motorbikes a year across Europe, and would struggle if targeted tariffs against its US-manufactured products were introduced. To my Foolish eye, though, that still leaves U.S. Steel stock looking like the most expensive stock in a highly valued metals sector - and the one most vulnerable to a fall. "FAIR!" he said in a tweet published on Saturday. France's Bruno Le Maire said that he's concerned about "a trade war between the European Union and the U.S." while his Spanish counterpart Roman Escolano, making his debut as minister, said protectionism is always a mistake.

Once the building boom cooled, suppliers left with vast stockpiles of unsold goods resorted to price-cutting wars that threatened many with bankruptcy. That system was set in place after the end of World War II with the General Agreement on Tariffs and Trade.

The tariffs are 25 percent on steel imports and 10 percent on aluminum. To put that into perspective, that's about $470 billion - roughly the size of Thailand's output.

China has repeatedly vowed to defend its "legitimate rights and interests" if targeted by United States trade actions. "But we are kind of collateral damage". Earlier this year, Trump pulled the US out of the Trans-Pacific Partnership.

Joseph Galimberti, president of the Canadian Steel Producers Association, said Ottawa is being urged to add staff to Global Affairs Canada and hire more inspectors for the Canada Border Services Agency.

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