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Trump picks trade fight with Canada

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Trade tensions spiked between Washington and Ottawa on Tuesday as President Donald Trump accused Canada of being "very rough" on America and threatened to retaliate against restrictions on US dairy products.

Trump also touted his administration's surprise decision late Monday to rekindle an old trade conflict with America's second-largest trading partner by slapping new tariffs on Canadian softwood lumber.

"People don't realize, Canada has been very rough on the United States. Everyone thinks of Canada of being nice but they've outsmarted our politicians for many years," Trump told a group of farmers at the White House.

He said Canada was hurting American dairy farmers near the border, from Wisconsin to New York, by blocking dairy exports "and we're not going to put up with it."

Trump's aggressive comments echoed a tweet he sent earlier in the day, just hours after the Commerce Department announced it was imposing tariffs of up to 24 percent on Canadian softwood lumber, which it says is improperly subsidized.

- Trump-Trudeau call -
Addressing reporters at the White House on Tuesday, Commerce Secretary Wilbur Ross said the twin disputes underline the problems with the North American Free Trade Agreement linking the United States with Canada and Mexico, which Trump has vowed to renegotiate.

"If NAFTA were functioning properly, you wouldn't be having these kinds of very prickly and unfortunate events back to back," Ross said. "They are generally a good neighbor. That doesn't mean they don't have to play by the rules."

Canadian Prime Minister Justin Trudeau responded to the unexpected burst of tough rhetoric by vowing his government would be "very firm in defending Canada's interests."

But Trudeau also said his officials "will work constructively together" with the United States to find a solution.

The prime minister telephoned Trump late Tuesday to underscore that the US take on softwood lumber was "baseless."

Trudeau "refuted the baseless allegations by the US Department of Commerce and the decision to impose unfair duties," his office said.

Trump's White House acknowledged the two leaders discussed Canadian lumber and the dairy trade in the US state of Wisconsin. "It was a very amicable call," a statement said.

The softwood lumber dispute between Washington and Ottawa has also seen many twists and turns for nearly 35 years, with US producers accusing their Canadian counterparts of exporting lumber at subsidized prices, harming American businesses.

The wood is a major part of the massive US construction and home-building industry -- an economic bellwether. Most US homes are made with wood framing and some entirely of wood.

In the long-standing dispute, the Commerce Department announced late Monday that after talks with Ottawa failed to yield an agreement, it would impose duties of between three and 24 percent on softwood lumber, used for flooring, siding and other building products.

Ross justified the duties by saying Canadian firms "charge a subsidized low price when the products hit the US border."

The US Commerce Department said it will conduct a thorough investigation and confirm its position on the lumber tariffs by September 27. If confirmed, the tariffs would then have to be approved by the US International Trade Commission.

- Dairy dilemma -
Canada's dairy sector is protected by tariffs on imports and controls on domestic production as a way to support prices for the country's farmers.

The latest row was triggered when Canada extended those policies to apply to ultrafiltered milk, a product used in cheese production and at the center of a thriving US export business.

The US Dairy Export Council said the extension "blatantly blocks American dairy exports" and urged Trump to "take immediate action" to protect dozens of US farmers.

While no other immediate retaliation was planned against Ottawa, Ross said Washington was looking into measures to "correct" what it says is an effective block on a new class of US dairy exports.

"The problem with dairy isn't that they're dumping dairy products in the US. The problem is worse. They are prohibiting US dairy producers from selling their products in Canada," Ross said.

Trudeau told Trump -- whose country is favored in bilateral dairy trade -- "that Canada upholds its international trade obligations, including the North American Free Trade Agreement, under which the US continues to have duty-free and quota-free access for milk protein substances, including diafiltered milk, and that Canada would continue to defend its interests."

Canada imports over $550 million of US dairy products annually. It exports $110 million to the US market, Canadian data show.



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