Published: Sun, June 10, 2018
People | By Leon Thompson

Developments on trade as Trump heads to Canada for summit

Developments on trade as Trump heads to Canada for summit

Kudlow added that the USA and China had not yet reached a deal to resolve Trump's demand for a smaller U.S. trade deficit with China.

The G-7's only Asian member, Japan, has close relations with the White House, but Prime Minister Shinzo Abe's support for Trump's North Korean outreach has not seen his country spared the tariffs. That led to threats of retaliation.

A senior European Union official briefing reporters on the pre-summit negotiations used discreet understatement to describe the impasse, but only ended up underscoring the width of the rift. As of May 31, they've all expired, and the USA government decided not to renew them.

President Donald Trump mentioned the War of 1812 in an attempt to needle Canadian Prime Minister Justin Trudeau during a recent conversation focused on tariffs, CNN reported Wednesday.

He noted that the talks to revamp NAFTA have "dragged on" so separate deals "might be able to happen more rapidly", and expressed hope the response from Ottawa will come "as soon as possible and move the whole process forward".

Trump has accused Canada of ripping off the United States through unfair trade practices, and Canadian officials have said Trump is using inaccurate information to attack a USA ally. However he did promise tit-for-tat tariffs on USA items and to up the ante with new tariffs on completed client items.

To see why these three US allies are so upset, one need only look at the biggest suppliers of USA metals. Canada dominates, supplying more than a quarter of all USA steel, aluminum and iron imports in 2016. More importantly, steel exports to the USA make up more than half of total Canadian production.

The president had initially exempted Canada from the steel and aluminum tariffs in March. Steel exports to the US also make up more than half of Mexican production.

The EU is the single biggest market for exported USA goods, buying US$270 billion of American products in 2016, followed closely by Canada and Mexico. By comparison, China buys just $116 billion.

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Canadian Prime Minister Justin Trudeau predicted "robust discussions" on trade, but other G7 members like Japan and Italy seemed less likely to want to challenge the USA president. Mexico sells about 80% of its exports to the US.

What are tariffs? Taxes on products made overseas.

So far, only Canada and Mexico have done so. Canada announced dollar-for-dollar tariffs on steel and aluminum, as well as sanctions of 15 percent to 25 percent on whiskey, orange juice and other food products.

The EU issued an update on its response on Wednesday, 24 hours after Mexico confirmed it had launched tit-for-tat tariffs on USA steel and was also targeting United States goods such as pork and bourbon products. They're likely to buy cheaper local products instead, boosting your country's economy. In that case the tariffs were withdrawn 18 months later after adversely affecting GDP and employment in the U.S.

"They are relying on the overwhelming strength of the U.S.to compel a much weaker neighbor to give in to whatever they demand", Bothwell said.

Disruption to U.S. -Canada trade could also affect cross-border supply chains that have grown during the NAFTA era. The automotive industry is particularly vulnerable in this regard.

The EU told the World Trade Organization last month it planned to enact tariffs on more than $3 billion worth of USA goods, including agricultural products such as rice, corn, dry kidney beans, cranberries, tobacco and orange juice. Most have threatened retaliatory measures.

"The prime minister noted that, given our shared history, it is inconceivable that Canadian steel or aluminum might be a security threat to the U.S".

But no matter how Trump's latest hired gun tried to portray his leader as as a man of "backbone", taking on a broken world trade system with the simple sword of truth and the trusty shield of fair play, there are growing concerns that his trade policy might have a disastrous impact on the USA and global economies. Read the original article.

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