By Paul Vieira in Ottawa and Joshua Zumbrun in Washington 

Canada said Friday it intends to slap its own tariffs on a range of U.S. products that contain aluminum -- ranging from washing machines to golf clubs to canned beverages -- in retaliation to President Trump's move this week to aggravate one of the world's largest and steadiest trading relationships.

The decision by Canada marks a return to the tense trade rhetoric that nearly derailed negotiations toward a successful conclusion of a new U.S.-Mexico-Canada agreement, which officially came into force last month. The new pact was meant to replace a North American trade treaty that Mr. Trump argued was the worst trade deal ever made. The fight over aluminum, just weeks after the new treaty kicked in, threatens to upend whatever stability and trade peace USMCA was meant to introduce.

On Thursday, Mr. Trump said the U.S. would reimpose a tariff of 10% on some aluminum produced in Canada, arguing imports from America's northern neighbor were surging into the U.S., and depressing the U.S. industry. The administration justified the tariffs using a national security provision and argued that a depressed U.S. aluminum industry threatens U.S. national security. The U.S. placed tariffs on Canadian aluminum and steel under this provision in 2018 before agreeing to lift them after USMCA was concluded.

Canada said it would swiftly retaliate to the president's decision. The country's Deputy Prime Minister, Chrystia Freeland, unveiled Friday a list of U.S.-made items it could target. The government plans to place tariffs on U.S. goods with a value of 3.6 billion Canadian dollars ($2.71 billion), or the equivalent of what Canadian aluminum faces from the U.S. tariff.

"We will not escalate, but we will not back down," Ms. Freeland told reporters in a teleconference. Products targeted contain aluminum, and include items such as bars of the metal and consumer goods like washers, refrigerators and golf clubs. The goods targeted are meant to minimize damage to the Canadian economy, "and to have the strongest possible impact in the U.S.," Ms. Freeland said. "We hope when Americans look at this list, they will understand why this dispute is a bad idea."

Before her announcement, business leaders and regional politicians in Canada demanded that Ottawa retaliate forcefully. "Canada has to be as aggressive as needed to get the Trump administration's attention. We have to play this game," said Dennis Darby, head of the Canadian Manufacturers and Exporters, a lobbying group.

Doug Ford, the premier of Ontario, Canada's most populous province, said Ms. Freeland should slap tariffs on every available item possible, and that citizens should skip over American products and to opt to buy Canadian-made goods. "We will come back swinging like the U.S. has never seen before," Mr. Ford said.

Canada has long been one of America's closest economic allies, and the two nations enjoy a largely balanced trading relationship. While the U.S. has large trade deficits with China and Mexico, exports and imports of goods with Canada have been close to even at about $300 billion a year in recent years. The relationship has turned volatile during the Trump administration, which threatened to shut off Canada's preferential access to the U.S. market unless it agreed to new terms in a revised North American deal. Roughly three quarters of all Canadian exports are U.S. bound.

The proposed Canadian tariff, also of 10%, is scheduled to kick in 30 days after the U.S. starts issuing levies on Canadian aluminum. The U.S. tariff is set to take effect on Aug. 16. Ms. Freeland said Canadian officials will consult with industry and regional governments, and those talks could result in changes to the target list. A spokesman from the U.S. Trade Representative's office didn't respond to a request for comment.

Mr. Trump said during a speech at a Whirlpool factory in Clyde, Ohio Thursday the tariffs were necessary because "Canada was taking advantage of us, as usual."

Ms. Freeland warned the tariffs threatened to cause the most harm to U.S. consumers. "Any American who buys a can of beer or soda, or a bike, will suffer," she said.

Canada is the fourth-largest aluminum producer in the world. Most of the aluminum industry opposes the tariffs on allies like Canada, and says that China is behind problematic trade practices in the aluminum industry.

At the heart of the dispute is two ways of looking at aluminum imports from Canada. The U.S. imports aluminum that is classified into two primary types: raw aluminum without any added alloys, and aluminum that contains the alloys.

Over the past year, total U.S. imports of Canadian aluminum have been little changed at about $200 million a month. But there has been a significant shift in the types of aluminum coming into the U.S. Imports of unalloyed aluminum have climbed rapidly, while alloyed aluminum has dropped. In justifying the tariffs, the U.S. pointed to the surge in unalloyed aluminum.

The Aluminum Association, which represents most of the U.S. aluminum industry, says the data has been cherry picked to make the case for a surge. "All in all, it's the same volume of product that's crossing [the border]," said Jean Simard, president of the Aluminum Association of Canada. "It's just the balance of types [of aluminum] is inverted for the time being."

The tariffs of 10% will only affect the unalloyed aluminum. Over the past 12 months, the U.S. imported about $1.7 billion of such aluminum from Canada.

--Kim Mackrael contributed to this article.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

August 07, 2020 15:03 ET (19:03 GMT)

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