Sitting in his Minneapolis office, Canadian Consul General Paul Connors stresses that his country does not want to apply new tariffs on roughly $264 million worth of Minnesota products that are shipped north of the U.S. border each year. Those levies will add $35 million annually to the cost of certain Canadian-bound Minnesota metals, food, wood and paper products.
But Connors makes equally clear that the only way his government will stop the July 1 implementation of its new tariffs is if the United States withdraws just-imposed tariffs of 25 percent on Canadian steel and 10 percent on Canadian aluminum, which President Donald Trump applied in the name of national security.
“You haven’t said there is a problem in trading steel with Canada, or we’re doing something unfairly, or we’re dumping steel in your market,” explained Connors, who represents Canada’s diplomatic and trade interests in Minnesota, Iowa, Nebraska, North Dakota and South Dakota. “The U.S. administration took this action under national security grounds.
“That just flies in the face of our security cooperation. We stood together in World War II. We stood together in Korea, right on up to going into Afghanistan after you guys were attacked. As we sit here today, Canadian Special Forces are embedded with U.S. Special Forces in Syria and Iraq, addressing Islamic terrorism. It’s hard for us Canadians to understand how we’re a security threat to the United States.”
In fact, critics of Trump’s trade policies such as international trade specialist Robert Kudrle at the University of Minnesota say the national security argument is an administrative ruse to bypass Congress and engage in isolationist economics.
Trump calls his trade policy “America first” and says it will force international trading partners to treat U.S. businesses more fairly, increasing their market shares and creating jobs in the U.S.
“Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!” the president tweeted last week.
“Canada has treated our Agricultural business and Farmers very poorly for a very long period of time,” the president tweeted on June 1. “Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?”
Connors counters that the U.S. actually enjoys an overall trade surplus with Canada. National figures show agricultural trade with Canada grew from $14.7 billion in 2007 to $20.2 billion in 2016. Minnesota’s agricultural trade with Canada went from $493 million in 2010 to $571 million in 2016, according to Su Ye, an economist with the state agricultural department.
$2 billion a day
So Connors is about to embark on a whirlwind tour of the Midwest trying to set the record straight.
“The Canada-U.S. trading relationship is almost $2 billion a day,” Connors said. “It was $680 billion last year. Notwithstanding what the president keeps saying, [the U.S.] had a [trading] surplus with Canada last year, as you did the year before. You do not have a deficit with Canada.
“On the Minnesota piece you sent us last year $4.3 billion [in exports]. As I look at the list, iron ore and taconite from the Iron Range is a large export to Canada. But also on the food side — animal feed, bread, pasta, cereal. You have great companies here — Hormel, Cargill, Land O’Lakes. And they’re very active in Canada.”
Connors hopes every U.S. industry sector facing higher costs due to tariffs will push back against the White House.
In Minnesota, steel and aluminum users, such as Polaris Industries and Pentair, and makers and distributors of processed and finished food products, such as General Mills and Land O’Lakes, face possible cost increases from U.S. tariffs and Canadian retaliatory tariffs.
Polaris, which makes all-terrain vehicles and motorcycles, sold nearly $376 million worth of products north of the border in 2017, according to Security and Exchange Commission (SEC) filings.
The company estimates that the metal tariffs will add $15 million to costs in 2018. It is making contingency plans for more expenses that could arise from retaliatory tariffs like those that Canada and Mexico have announced.
“We are disappointed in the recent tariffs imposed on our [North American Free Trade Agreement] partners and support efforts to find a better solution,” spokeswoman Jessica Rogers said.
General Mills makes yogurt, a product targeted for a possible new 10 percent Canadian tariff. Across all product lines, Mills had roughly $900 million in Canadian sales in 2017, SEC records show.
Minnesota-based Cargill and Land O’Lakes greeted news of steel and aluminum tariffs placed on U.S. allies in Canada, Mexico and the European Union with expressions of concern. Cargill’s global corporate affairs chief Devry Boughner Vorwerk called the possibility of a trade war a losing proposition for every country that gets sucked in.
“In a reciprocal tariff battle, there are no winners,” she said in a statement to the Star Tribune. “All sides suffer the economic consequences of declining exports, higher prices for consumers and businesses, and lost trade opportunities.”
At the trade group Associated General Contractors Minnesota, CEO Tim Worke said Canadian steel and aluminum represent a “substantial” supply source for members.
“I’m hearing price quotes have gone up sharply just on the announcement [of tariffs],” Worke said.
As prices rise, so does the rhetoric. Canada does not intend to be bullied by the U.S. Nor does Mexico, which said last week that it has placed a 25 percent tariff on U.S. steel and 10 percent tariff on U.S. aluminum, along with a 20 percent tariff on some U.S. pork products and 20 to 25 percent tariffs on cheeses, which will hit Minnesota’s hog and dairy industries.
Meanwhile, Connors notes that the U.S. metal tariffs designed to protect and rebuild the U.S. steel and aluminum industries might actually hurt Minnesota’s taconite and iron ore business.
“Last year you sent about $200 million worth of iron ore and taconite to Canada,” Connors said. “A little bit of that was transshipped on to another market. But most of it was turned into steel in Canada. I think Minnesotans implicitly understand how much steel and aluminum we use throughout the economy.”
So the consul general will hit the road trying to persuade Minnesotans, Iowans, Nebraskans and Dakotans North and South to lobby hard and fast to remove tariffs that inevitably draw retaliation.
“If these decisions aren’t reversed,” Connors concluded, “we’re about to make a lot of things that people buy a lot more expensive.”