OTTAWA—Canada hit back at U.S. President Donald Trump on Thursday by announcing tariffs on dozens of U.S. products in retaliation for American steel and aluminum tariffs that Prime Minister Justin Trudeau called a “turning point in the Canada-U.S. relationship.”

Trudeau said Trump’s tariffs, imposed on supposed national security grounds after NAFTA negotiations stalled, were “totally unacceptable” and “an affront” to a country whose soldiers have fought and died with American soldiers.

“We have to believe at some point common sense will prevail. But we see no sign of that in the U.S. action today,” Trudeau said.

Trump’s move will harm Canadian companies and further complicate the talks over the future of continental trade. The tit-for-tat exchange of tariffs is likely to raise prices on a variety of consumer goods popular with both Canadians and Americans.

Trump is imposing 25 per cent steel tariffs and 10 per cent aluminum tariffs on Canada, Mexico and the European Union, all of which he had previously exempted. Despite the official national security rationale, Commerce Secretary Wilbur Ross told reporters that Trump actually acted against Canada because NAFTA talks “are taking longer than we had hoped.”

Trudeau responded with a list of tariffs to take effect July 1 on more than 100 U.S. products. The list includes not only industrial steel and aluminum items but consumer products, from ketchup to dishwasher detergent to boats to toilet paper to playing cards to insecticide to washing machines.

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Trudeau’s retaliatory measures and sharp criticism were a marked shift in his approach to the U.S. after more than a year of trying to avoid confrontation with the impulsive president. Asked if he was starting a trade war with the U.S., Trudeau replied: “I’ve said for a long time we were ready for anything.”

Canada plans to hit the U.S. steel items with a 25 per cent tariff, the consumer goods with a 10 per cent tariff. Foreign Affairs Minister Chrystia Freeland said Canada was also launching a challenge to Trump’s tariffs at the World Trade Organization.

Trump said in a nighttime statement: “The United States has been taken advantage of for many decades on trade. Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State (sic) will agree to a fair deal, or there will be no deal at all.”

The Canadian measures take aim at $16.6 billion worth of goods — equivalent to the 2017 value of Canadian steel and aluminum exports hit by the American tariffs, Freeland said — and are designed to make U.S. officials sit up and take notice.

“This the strongest trade action Canada has taken in the postwar era,” Foreign Affairs Minister Chrystia Freeland said.

A senior Canadian official said the list is designed to exert maximum political pressure on Congress, with an eye on particular districts and individuals of both parties. The official said the target list skews toward Republicans, since they control the White House and both chambers of Congress.

Trade lawyers at the firm of Borden, Ladner, Gervais pointed out Ottawa has targeted large industrial states in the American northeast and upper midwest, the source of much of the U.S. steel that makes its way to Canada. Other targets: agriculture and agrifood products from key farming constituencies, and products from potential swing states in the midterm elections. The list includes whiskey, a popular export from Senate Majority Leader Mitch McConnell’s home state of Kentucky.

“The list is economically calibrated and it’s politically calibrated,” said BLG lawyer Jesse Goldman. “There are products on that list that are targeted to hurt U.S. exporters in key states in order to maximize the political pressure in the U.S. So there’s a short game and a long game here.”

Trudeau said at a news conference that Trump scuttled what the prime minister thought was an all-but-finished North American Free Trade Agreement deal by demanding Canada sign onto a five-year “sunset clause” before Trump would even agree to meet Trudeau this week in Washington. Trudeau refused.

U.S. Commerce Secretary Wilbur Ross said the decision was based on the lack of progress in the ongoing NAFTA talks. (The Canadian Press)

The White House disputed Trudeau’s claim, according to BuzzFeed, with Pence saying they were never close to a deal.

The U.S. tariffs go into effect Friday. The Canadian tariffs don’t take effect for a month, effectively giving Trump time to back down. But if they do kick in, they will remain in place until the U.S. removes its own tariffs on Canadian products, Freeland said.

The tariffs are a tax on imports from the U.S. While Freeland said officials tried to pick items where Canadian consumers could find replacements for the U.S. products, either from Canada or elsewhere, Canadian grocers and other retailers might pass along the cost of the tariffs by raising the prices of the U.S. goods Canadians like best.

Mexico and the EU also announced plans to retaliate with tariffs on U.S. products. Like Canada, their lists include products from states of political importance. Both Canada and the E.U. lists, for example, include orange juice, an export important to the swing state of Florida.

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The economic purpose of the tariffs is to make imports from Canada, Mexico and the E.U. more expensive for American customers, in theory compelling them to use American products instead.

U.S. Commerce Secretary Wilbur Ross said the decision was based on the lack of progress in the ongoing NAFTA talks. (The Canadian Press)

But some are likely to continue to use many Canadian products even at higher prices. Analysts said U.S. producers cannot meet all the domestic demand.

“In the broad, it should not be terribly damaging to Canada. Because the United States does rely on Canada for substantial steel and aluminum imports, and that can’t be replaced quickly, if at all. But for specific firms and for specific steel and aluminum products, the immediate impact could be significant,” said Scotiabank deputy chief economist Brett House.

The Canadian steel industry is concentrated in Ontario, the aluminum industry in Quebec. The tariffs could have a disproportionate impact in Hamilton and Sault Ste. Marie.

Finance Minister Bill Morneau says trade will be discussed “first and foremost” at a meeting of G7 finance ministers this week and at the leaders’ summit next week following the U.S. decision to impose steel and aluminum tariffs on Canada. (The Canadian Press)

“This decision by the Trump administration is a significant threat to the livelihoods of the 22,000 Canadians who work in Canadian steel,” said Joseph Galimberti, president of the Canadian Steel Producers Association.

But Chuck Bradford, a U.S.-based metals analyst, said there would be “no effect” on Canadian steel producers. Their U.S. customers, he said, “may not have any choice: there may not be any steel available of the grades they need.” And even if there is, Bradford said, they may be most comfortable sticking with their previous supplier.

“If you’re an automaker...you’d like the supplier that you have, because you know your equipment works well with their type of steel,” he said.

Jean Simard, president of the Aluminum Association of Canada, said it is “impossible” for American aluminum producers to step in and fill that country’s demand. He said the tariffs would harm the manufacturers that require aluminum.

“Steel and aluminum are used everywhere in the economy. It’s not just the soda can that’s going to go up in price, it’s the automobile, it’s the flashlight, it’s everything, and it accelerates inflation in the economy,” Simard said. “It’s a big sleeper; it’s the kind of thing that happens, you don’t feel it and at some point in time you look at the statistics and you’ve destroyed hundreds of thousands of jobs.”

The U.S. is the destination for about 90 per cent of Canada’s steel exports, more than $5 billion worth per year. Canada is the source of 17 per cent of all steel the U.S. brings in from abroad, making it the number-one source of imports.

Conservative foreign affairs critic Erin O’Toole said Trudeau failed to make an effective anti-tariffs case to Trump.

“Today this is a defeat for Justin Trudeau,” O’Toole said.

Conservative MP Erin O’Toole is calling U.S. tariffs on Canadian steel and aluminum a “failure” of the prime minister. Transport Minister Marc Garneau reiterated the Liberals’ plan to retaliate with “dollar-for-dollar” tariffs. (The Canadian Press)

The politics of the tariffs are complicated for Trump. He has vowed to bring back lost jobs at U.S. steel producers, and tariffs on foreign products can help. Some of his voters favour a hard line on trade.

But big businesses that rely on imported steel and aluminum are opposed to the tariffs, and they say the higher prices will force them into job cuts. Farmers, meanwhile, are worried they will be hurt by retaliatory tariffs from other countries. And average consumers could pay more for a variety of products.

Trump was criticized Thursday not only by foreign leaders and Democrats but several Republican senators. Nebraska’s Ben Sasse said in a statement: “This is dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents.”

Mexico said it would impose retaliatory tariffs on steel, pork, apples, grapes, cheeses, and other U.S. products. The European Union vowed to hit back on numerous products, floating possible tariffs on rice, beans, orange juice, cranberries, bourbon, jeans, motor boats, shoes, makeup and cigarettes, plus various steel products.

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