A global trade war over U.S. steel and aluminum tariffs could plunge the world into another recession, said the head of the World Trade Organization in a statement urging international leaders to remain calm.
Some, including Finance Minister Bill Morneau, appear to be taking the same approach of saying little that could strain relations further.
Director-General Roberto Azevêdo of the World Trade Organization called for measured responses from member states in a statement Monday and said the effects of escalating trade barriers could lead to another recession.
“In light of recent announcements on trade policy measures, it is clear that we now see a much higher and real risk of triggering an escalation of trade barriers across the globe,” he said.
“We cannot ignore this risk and I urge all parties to consider and reflect on this situation very carefully. Once we start down this path, it will be very difficult to reverse direction. An eye for an eye will leave us all blind and the world in deep recession. We must make every effort to avoid the fall of the first dominoes. There is still time.”
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Speaking with reporters following an appearance in Toronto as part of his post-budget tour, Morneau took a cautious tone in warning that the tariffs could lead to higher costs for American consumers but avoiding making any overt threats of retaliation.
“We, as you know, have put forward strongly our point of view that there’s no advantage for the United States in putting forth tariffs on Canadian steel and aluminum,” he said. “In fact, we see a disadvantage. We see a disadvantage for American businesses, we see a disadvantage for Americans with potentially higher costs and we see a disadvantage from a security standpoint as we see Canada, as a staunch ally of the United States, being integral to their supply chain.”
When asked whether Canada would consider retaliatory measures against the U.S. if it does not grant an exemption for Canadian businesses, Morneau said little.
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“We’ve been firm,” he added when asked by reporters.
“We believe that Canada should be exempted from any decisions the United States takes and we will consider how to react based on the news that comes out.”
U.S President Donald Trump announced last week he would implement a 25 per cent tariff on foreign steel and a 10 per cent tariff on imported aluminum.
Prime Minister Justin Trudeau called that proposal “absolutely unacceptable” on Friday and said it “makes no sense.”
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The announcement of the tariffs Thursday left Canadian businesses reeling and politicians scrambling to ease fears about the potentially disastrous effects the tariffs could have on Canadian industry.
Of the steel imported each year by the U.S., 16 per cent comes from Canada.
Canada also is the biggest foreign buyer of American steel, and Trudeau said Friday that the effects of the tariffs proposed by Trump would be significant.
“Disruptions to this integrated market would be significant and serious.”
According to the Canadian Steel Producers Association, Canada and the U.S. traded $12 billion worth of “evenly balanced” steel in 2017.
South of the border, Trump seemed to suggest in a tweet Monday morning that Canada and Mexico could get exemptions from the tariffs if they sign a NAFTA deal to the president’s liking.
That comment comes after Trump said last week that “trade wars are good” and would be “easy to win” for the U.S.
However, there are reports that Republican leaders in Washington, D.C., are increasingly considering their options for how to respond to the measures by the president with some, including a spokesperson for House of Representatives Speaker Paul Ryan, being quoted by CBS News reporter Steven Portnoy on Monday as saying the office is urging Trump not to proceed with the plan.
The Dow Jones Industrial Average dropped roughly two per cent on the news of the tariffs last week.
The American International Automobile Dealers Association also warned that similar tariffs implemented by former president George W. Bush cost 200,000 jobs in the auto sector in 2002.
“I think we saw the concerns in markets already,” said Pedro Antuses, deputy chief economist at the Conference Board of Canada, cautioning that political leaders would be wise to take a cautious approach to reacting to the unpredictable American president.
“Is it just another strategy to gain an upper hand somehow on the NAFTA negotiations or is he threatening this for real? We’ll have to wait and see.”
Negotiators are wrapping up a week of negotiations in Mexico City aimed at reaching agreement on a revised NAFTA.
Monday marks the final day of the seventh round of discussions, with an eighth — and for now, final — round scheduled to take place in Washington later this month.