U.S. milk and Canadian wood are driving the two North American nations toward a potential trade war.
The U.S. recently slapped a steep tariff on Canada's softwood lumber exports after Canada added more U.S. dairy products to its list of heavily tariffed goods. Producers in both industries are worried about losing jobs.
As Commerce Secretary Wilbur Ross observed: "It has been a bad week for U.S.-Canada trade relations. ... This is not our idea of a properly functioning Free Trade Agreement."
The tariffs are new, but the debates fueling them are pretty old. And they could have dire implications for the North American Free Trade Agreement, or NAFTA.
For decades, U.S. lumber companies have been complaining that Canadian companies have an unfair advantage — their timber largely comes from publicly owned land maintained by the government.
Canada has successfully defended its policies in the past, but President Trump's Commerce Department still found Canada was unfairly subsidizing lumber exports — and will start charging Canadian lumber anywhere from 3 to 24 percent more when it crosses the border.
Those tariffs are high, but not as high as the astronomical ones Canada imposes on dairy imports to protect its domestic market from the U.S. glut.
Some products, like ultra-filtered milk, were able to get around that restriction — until Canada reclassified those products under its heavy tariffs.
NAFTA doesn't cover Canada's dairy industry, and its dispute panels have consistently favored Canada on the softwood issue. So these recent trade fights aren't endearing the agreement to its No. 1 critic — President Trump.
Trump said during a speech: "In Canada, some very unfair things have happened to our dairy farmers and others, and we're going to start working on that. ... The fact is, NAFTA has been a complete and total disaster for the United States — a complete and total disaster."
