Article content continued

Trump rattled world markets last week when he proposed tariffs of 25 per cent on steel and 10 per cent on aluminum, arguing the imports posed a threat to national security. Rules established by the WTO would permit a country to retaliate if there is a legal finding that this rationale is baseless.

“The compensation—or retaliation—limit has historically been set at the value of an exporting country’s lost trade,” Bown writes.

It follows that Canada, as the nation most injured, would be entitled to the largest retaliation at US$3.2 billion, he added.

How would it work? First, the U.S. would have to impose the levies. Then Canada would have to challenge the country’s claim that the tariffs are justifiable under the “national security exception” in the General Agreement on Tariffs and Trade (GATT). Should a WTO panel rule against that reasoning, the U.S. would be required to amend the tariffs. If it refuses, Canada can request compensation and the WTO can establish an “authorized retaliation.”

Once the amount of lost trade is established, Canada would have discretion to draw up a list of which U.S. products to target. These items can be selected according to economic or political motives. For instance, if Trump goes ahead with the tariffs, the EU has said it will respond with levies on Harley-Davidson motorcycles, Kentucky bourbon and Levi’s blue jeans — products manufactured in the home states of key Republican leaders including Senate Majority Leader Mitch McConnell and House Speaker Paul D. Ryan.