Some items will be subject to taxes of 10 or 25 percent. Jeremy Spence, an area manager in cold rolling at Stelco, takes a selfie with Chrystia Freeland, Canada's Minister of Foreign Affairs. Credit:AP "We will not escalate and we will not back down," Canadian Foreign Minister Chrystia Freeland said. "This is a perfectly reciprocal action. It is a dollar-for-dollar response." Loading Many of the US products were chosen for their political rather than economic impact. For example, Canada imports just $3 million worth of yoghurt from the US annually and most of it comes from one plant in Wisconsin, the home state of House Speaker Paul Ryan. The product will now be hit with a 10 per cent duty.

Freeland also said they are prepared if US President Donald Trump escalates the trade war. "It is absolutely imperative that common sense should prevail," she said. "Having said that our approach from day one of the NAFTA negotiations has been to hope for the best but prepare for the worst." Axios news agency reported on Friday that Trump had repeatedly told top White House officials he wants to exit the WTO, citing unidentified sources. However, Treasury Secretary Steven Mnuchin called the report an "exaggeration," while White House legislative aide Marc Short said he was unfamiliar with any plan to pull out of the Geneva-based group. A WTO official said Friday that the organisation has not heard from the US about reconsidering its membership.

Donald Trump at an event to mark the sixth-month anniversary of the Tax Cuts and Jobs Act, saying tariffs are bringing "billions of dollars" to the US. Credit:Bloomberg US tariffs on $34 billion worth of Chinese goods are to take effect July 6 and a further $16 billion in tariffs. China has said it would retaliate in kind. Trump says his tariffs are designed to protect domestic industries that have been hammered by an unfair global trading system. At an event on Friday, he said his new tariffs were bringing "billions of dollars" to the US. Trump has long criticised the WTO for allowing countries such as China to impose high tariffs on American goods such as cars even as its economy has matured, though as president he's stopped short of pledging to withdraw from the group. Trump "has concerns about the WTO," Mnuchin said on Friday on the Fox TV network. "He thinks there's aspects of it that aren't fair."

Short later echoed Mnuchin, saying: "The president has expressed frustrations with international organisations, from a sovereignty perspective. "But I think that the president also believes that there's extensive tariffs assessed on American products overseas. That it's not a reciprocal tariff." Pulling out of the WTO would isolate the US from the world economy, said Rufus Yerxa, a former deputy director general at the WTO. "If you want to change it you have to make serious proposals, but you don't just walk away," he said. While the US can leave the WTO, it's uncertain whether Trump could do so without approval from Congress. Many lawmakers, including Republican proponents of free trade, would be likely to put up a fight. A US withdrawal also would put US exporters at risk, as other WTO members could raise tariffs on American imports. The US would also forfeit any ability to overturn unfair trade practices in the WTO dispute-settlement system. "Congress would not accept that," said Bill Reinsch, senior adviser at the Centre for Strategic and International Studies. "They are very well aware how it has benefited the US When we file a complaint, we generally win."

Still, Trump has made good on threats to pull out of other international agreements, including the Iran nuclear deal and Paris climate agreement. White House adviser Kellyanne Conway was less reassuring than her colleagues Friday that Trump wouldn't withdraw. "The president has made it very clear that he thinks that people who are members of a group like NATO should pay their fair share," she said on Fox Business. "I think the World Trade Organisation is another group that he's said we should take a look at. I'll leave any announcements to him." Trump has explained the steel and aluminum tariffs on Canada by saying imported metals threatened the United States' national security - a justification that countries rarely use because it can be so easily abused. He is also threatening to impose another national security-based tariff on imported cars, trucks and auto parts. That threat could be a negotiating ploy to restart talks on the North American Free Trade Agreement.

Trump with with Canadian Prime Minister Justin Trudeau during an awkward G7 Summit in early June. Credit:AP Canadians are particularly worried about auto tariffs because the industry is critical to Canada's economy. Freeland said such tariffs would be "absurd" because the North American auto industry is highly integrated and parts made in Canada often go to cars manufactured in the US and then sold back to Canadians. "Any trade action is disruptive on both sides of the border," Freeland said. Freeland said an "intensive phase" of NAFTA renegotiations will resume quickly after Sunday's elections in Mexico. "I don't think we'll see any reaction from the Trump administration. They are prepared for this," said Dan Ujczo, a trade lawyer in Columbus, Ohio. "Candidly, the Canadian retaliation is a drop in the bucket compared to the retaliation that we're going to see from China and elsewhere."

AP, Bloomberg