Canada Drops Counter-tariffs Threat After US Nixes Aluminum Levy

Canada and the United States on Tuesday narrowly avoided a trade war, after Washington walked back a 10 percent levy on Canadian aluminum imports and Ottawa dropped its threat of counter-tariffs.

The US annouced that its duty-free treatment will be retroactive to September 1.

However, the Office of the US Trade Representative (USTR) published a list of expected maximum monthly shipments of aluminum, and warned it will reimpose the tariff if imports exceed those amounts.

"After consultations with the Canadian government, the United States has determined that trade in non-alloyed, unwrought aluminum is likely to normalize in the last four months of 2020, with imports declining sharply from the surges experienced earlier in the year," USTR said in a statement.

"Accordingly, the United States will modify the terms of the 10 percent tariff imposed in August."

At a news conference in Ottawa, Canadian Trade Minister Mary Ng welcomed the US decision to lift its tariffs.

As such, she said, "Canada will not be imposing reciprocal counter-measures on the United States."

Deputy Prime Minister Chrystia Freeland, also on hand, said she was glad that "common sense has prevailed," again rejecting the US's national security justification for the tariffs on a close ally.

She added, however, "There are no guarantees going forward, as we have learned in our trading relationship with this administration.

"That's why our approach is to hope for the best and prepare for the worst. That's why we've been clear that we will impose retaliatory tariffs if tariffs are levied against our exports," Freeland said.

US President Donald Trump had exempted Canadian products from tariffs as part of the USMCA free trade deal between the two countries and Mexico.

But in August, only a month after the USMCA came into effect, he ordered the 10 percent tariff on aluminum starting on August 16, citing a 27 percent "surge" in imports from Canada that posed a threat to domestic production.

The decision sparked a furious reaction from Ottawa, which said it would hit American aluminum products with Can$3.6 billion (US$2.7 billion) in counter-tariffs.

The Canadian aluminum industry employs about 10,000 people, and earlier on Tuesday Prime Minister Justin Trudeau called the new tariffs "unfair."

Ottawa had been expected to roll out its list of items subject to the retaliatory measures on Tuesday, a mere hours before the US made its announcement.

A preliminary list published by the Canadian government included soda and beer cans, bicycles, golf clubs and washing machines.

USTR said it would consult with the Canadian government at the end of the year to review activity over the last four months as well as its expectations for 2021.