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US drops aluminum tariffs as Canada threatens to retaliate

In what is seen as a big win for the Trudeau government, the United States is backing down from a trade dispute with Canada.

US Trade Representative Robert Lighthizer announced Tuesday that his country is lifting its 10 percent tariff on Canadian aluminum (retroactive from September 1) just as the federal Liberals were getting ready to announce retaliatory measures. 

Prime Minister Justin Trudeau had told reporters on the second day of the cabinet retreat that his government will always “defend Canadian workers” and “our aluminum sector”.

US President Donald Trump imposed the 10 per cent tariff on raw aluminum from Canada on August 16 under Section 232 of the U.S. Trade Expansion Act, which states the imports pose a threat to American national security. The move was condemned by aluminum organizations on both sides of the border. 

At the time Trump accused Canadian producers of flooding the US with exports which had “decimated” the American aluminum business and was very “very unfair”.

Canadian officials said they would hit back with $3.6 billion in dollar-for-dollar retaliatory countermeasures after consulting the industry about the potential products to slap tariffs on. Washing machines, refrigerators, bicycles, golf clubs and beverage cans were some of the products being considered. 

While “common sense has prevailed” according to Deputy Prime Minister and Finance Minister Chrystia Freeland, the US tariff withdrawal does come with some caveats. 

Lighthizer’s office said that the US is ready to reimpose the tariffs should they see what they consider a “surge” in imports. Expectations for the cap on shipments of non-alloyed aluminum from Canada between September and December were also spelled out. The tariffs could be reimposed if shipment volumes exceed 105 per cent of the stated volumes, according to the US Trade Representative’s office.

“The United States will consult with the Canadian government at the end of the year to review the state of the aluminum trade in light of trade patterns during the four-month period and expected market conditions in 2021,” Lighthizer said in a statement.

While welcoming the US decision, the Canadian government also warned its neighbours that it is prepared to impose retaliatory measures if necessary.

“Should tariffs be reimposed, Canada will retaliate with perfectly reciprocal dollar-for-dollar tariffs,” Freeland said.

A tariff war would have seen the cost of products like appliances and sporting goods rise in both countries.

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