OTTAWA—Uncertainty and pessimistic speculation about whether the U.S. would pull the plug on the North American trade deal sent the Canadian dollar and the Mexican peso tumbling Wednesday, a sobering economic market message that came hours after Canada took an aggressive stand against U.S. trade practices.

Canadian officials rushed to dampen a Reuters report that said the Liberal government was “convinced” U.S. President Donald Trump would quit the trade pact.

Three senior Canadian government sources denied the report, telling the Star the Trudeau government has no clearer indication of what the mercurial president will do in advance of the next round of talks than it did when Justin Trudeau met Trump in October in Washington and emerged to say he was “ready for anything” from the U.S. president.

The sixth round of negotiations to rewrite NAFTA is set for Montreal from Jan. 23-28.

One official said of speculation Trump is set to quit the trade deal: “There’s nothing that we’ve heard that would lead us to believe definitively one way or another, and as far as we’re concerned nothing has changed in terms of contingency planning. We always suspected there was a chance that they’d do this at any moment, let alone after a round of negotiations.”

All three sources said, as the Star reported Tuesday, Ottawa is preparing nonetheless for the real possibility Trump could announce he’ll pull the U.S. out of the NAFTA — even if only as a negotiating ploy.

It would start a six-month withdrawal procedure. The big question is whether he’d need approval by Congress to do so.

Meanwhile, Canadian negotiators will stay at the negotiating table even if Trump makes good on his threat to start the withdrawal procedure, officials say.

Mexico, facing national elections on July 1, has threatened to walk away from talks if that happens.

The backdrop to Wednesday’s speculation was news that the Trudeau Liberal government had filed a wide-ranging formal trade complaint against the U.S. with the global trade body, the World Trade Organization, on Dec. 20, which triggered a 60-day consultation period before any formal legal action occurs.

The WTO released the complaint early Wednesday. Canadian officials told the Star the challenge is primarily a pressure tactic to force a softwood lumber deal that has remained elusive despite two years of fruitless talks — under both the Obama and Trump administrations — and that it is not deliberately aimed at putting pressure on negotiators at the NAFTA talks. Canada is willing to drop the complaint if a new agreement can be reached, said one official, speaking on a background-only basis.

But many, including Trump’s trade ambassador, see the threat of full-fledged legal action against the U.S. as a shot across the bow.

U.S. Trade Representative Robert Lighthizer in a statement Wednesday slammed Canada’s move as “a broad and ill-advised attack.”

Lighthizer accused Canada of acting “against its own workers’ and businesses’ interests.” If Canada succeeds in its “groundless” challenge, countries like China would primarily benefit, said Lighthizer, warning that it lowers American confidence that Canada is committed to “mutually beneficial trade.”

International trade lawyer Lawrence Herman said the Canadian challenge is “an aggressive move” by Ottawa that is fully within WTO rules, and amounts to a direct challenge that strikes “at the root of the U.S. political — if you will — trade policy system.”

“What it shows is that Canada strikes back, we’re not the Empire, but the junior partner strikes back.”

The U.S. has launched a series of aggressive trade actions against Canadian industries, including duties levied against Bombardier’s CSeries aircraft, and other tariffs and penalties aimed at Canadian softwood lumber, newsprint, and “super calendared” paper (a refined coated paper product). Herman said there’s “been no letup” on those U.S. measures, and because the Americans “view trade remedies as equivalent to the right to bear arms,” Canada should expect a fight, warned Herman.

“This will be probably one of the biggest, if not the biggest, WTO dispute Canada has ever launched.”

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“It will be fought aggressively by the United States and it will undoubtedly spill over into the NAFTA negotiations,” predicted Herman.

“My take is that the Canadian government probably recognized these negotiations aren’t going anywhere and there is unlikely to be any progress made in Montreal. So the timing (of the WTO challenge) is in light of that conclusion.”

Herman said the U.S. has only once ever quit a trade deal, in 1866.

It pulled out of the 1854 Reciprocity Agreement with what is now Canada, in apparent retaliation against Britain, and the president of the day sought congressional approval to do so.

Now, however, Herman said the day’s news showed “the markets have not fully factored in the effect of the uncertainty around the negotiations and the increased uncertainty if Donald Trump gives notice of intent to withdraw.”

The Canadian dollar fell after the Reuters report in late afternoon before closing at an average trading price of 80.03 cents U.S., down 0.27 of a U.S. cent. The Mexican peso had fallen 0.8 per cent.

Canada’s complaint at the WTO cites six U.S. trade practices that are violations of WTO trade rules. Ottawa says the U.S. improperly calculates rates, collects too much in anti-dumping and countervailing duties, improperly applies them retroactively, limits the ability of other countries to provide factual evidence to rebut charges of dumping or unfair subsidy, refuses timely full refunds after it loses a trade dispute, and has an “institutional bias” against foreigners when its trade review panels end in a tie vote.

And Canada gives 160 examples of U.S. measures taken against products originating around the world — a list that runs the gamut from steel pipe made in China or Brazil, pasta from Italy, shrimp from Thailand and softwood lumber and paper products from Canada — that Canada says were unfair trade “remedies.”

Foreign Affairs Minister Chrystia Freeland, in a statement Wednesday, said her department took the step of a trade complaint against the U.S. under both NAFTA dispute rules and the WTO because the U.S. commerce department’s decision to levy “punitive countervailing and anti-dumping duties against Canada’s softwood lumber producers is unfair and unwarranted.”

She said the WTO action “is part of our broader litigation to defend the hundreds of thousands of good, middle-class forestry jobs across our country.” And she urged the U.S. to “come to a durable negotiated agreement on softwood lumber.”

Susan Yurkovich, president of the B.C. Lumber Trade Council, issued a statement on behalf of B.C. softwood producers that welcomed the move.

British Columbia is the largest Canadian exporter of softwood lumber to the U.S., with about 145,000 direct and indirect jobs in the province linked to the forestry industry. In turn, she said, the Canada-U.S. trade relationship “depends on fair process and practices.”

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