US-Canada Tit-For-Tat Tariffs

US-Canada Tit-For-Tat
Tariffs 

Aside from the large scale stimulus aid from the
government and ultra-loose monetary policy tools from the Fed to support
economic recovery, President Trump took his protectionism to another level by
reimposing tariffs on Canada’s aluminium products. During his speech in Ohio on
Thursday, Trump said that the tariffs were crucial to defend the US aluminium
industry as Canadian producers had backtracked their commitment to stop
flooding the US market with a cheaper product. 

According to the statement on Trump’s presidential
proclamation, imports from Canada, which account for the largest share of
Canada’s aluminium exports to the US is surging above historical levels. The
surge has only intensified in recent months despite the drop in US demand.
Previously, Canada was exempted from the tariffs under the condition that
imports of steel and aluminium products from Canada remain at historical
levels.

Trump’s decision had since faced a backlash from
different groups of people; The US Chamber of Commerce warned that the tariffs
could raise costs for US manufacturers as imports on the product become more
expensive. Myron Brilliant, head of international affairs for the aluminium
industry group, said that the tariffs are opposed by US aluminium manufacturers
while considering the decision as ‘a step in the wrong direction’.

From Canada’s front, deputy Prime Minister Chrystia
Freeland called the measures ‘unwarranted and unacceptable’ while denying US
accusation of undermining their national security. According to her statement,
Canada is determined to stand up for their aluminium workers and is ready to
impose dollar-for-dollar countermeasures against the US. Canada’s Chamber of
Commerce also described the tariffs as a wrong instrument when it was first
imposed in 2018 and still remains wrong now.

The 25% and 10% tariffs on steel and aluminium on
Canada were first imposed in 2018 before the measures were lifted following the
United States-Mexico-Canada Agreement (USMCA). According to part of the
agreement, when one country is determined to import too much, the other nations
could potentially reimpose tariffs.

Reimposing the tariffs could undermine the newly free
trade agreement in the USMCA, which just only came into effect in July.
However, some argued that Trump’s decision to reimpose tariffs is a method to
regain popularity ahead of the US Presidential Election in November. US
President Donald Trump is under a lot of pressure after being criticized by
Americans for his poor handling of the pandemic, which had crippled the
country’s economy and costing millions of jobs with the unemployment rate at
its highest level since the Great Depression.

In the midst of the Covid-19 pandemic, the global
economy is at its weakest point, while governments and central banks from
different countries are struggling to save their economies. Although many
countries are cautiously reopening their economy as number of new cases
declining; the US however, is still affected by more than 50K new infections
daily.