U.S. Bans Canadian Dairy, Alcohol Products in Latest Trade Tit-for-Tat

President Donald Trump speaks during an event in the Oval Office in August. (Photo by Andrew Harnik/Getty Images)

Key Points

• The White House announced it will ban certain Canadian dairy and alcohol imports and limit government procurement access to Canadian businesses.
• The U.S. moves will take effect in about three weeks and follow Canada’s implementation of retaliatory tariffs on roughly $20 billion of goods.
• A senior administration official said the targeted goods account for 0.1% of U.S. consumption, playing down concerns about rising costs.

The White House on Tuesday said it would ban certain dairy and alcohol imports and limit government procurement access to Canadian businesses, effective in about three weeks, as the trade spat escalated.

The moves come as Canada’s retaliatory tariffs on about $20 billion of goods went into effect on Tuesday. Those duties were in response to the U.S. imposition of levies in July, using Section 338 of the Tariff Act of 1930 for the first time.

The trade tiff has unfolded as the Trump administration decided not to renew the U.S.-Mexico-Canada trade agreemen t it had signed in its first term.

The move set off a limbo period for a pact that governs about $1.8 trillion in global trade. While the U.S. has held formal talks with Mexico about the pact, it hasn’t done so with Canada.

A senior administration official late Tuesday noted Canada is the only country other than China to retaliate after U.S. trade actions and created the precedent for banning products. As a result, the U.S. was using a secondary authority under Section 338 to ban Canadian products.

“This is escalation—with new and different trade levers,” said Henrietta Treyz, head of economic policy research at Veda Partners.

The spat between the neighbors has morphed into something well beyond trade as Trump has floated the idea of making Canada a 51 st state, moved to rename Lake Ontario to Lake America, and posted a cartoon over the weekend on social media of Trump hitting Canada’s Prime Minister Mark Carney with a hockey stick. Earlier Tuesday, Trump said Canada’s Bombardier needed to make its jets in the U.S. or lose market access.

The heated rhetoric has trade analysts on watch for Trump beginning a 30-day withdrawal from USMCA. But for now, the White House response was more measured, with the official noting trade representatives are talking to their counterparts.

The White House also removed some of the items that it had initially imposed tariffs on in January, such as cement and rock salt, and replaced them with other goods. It is the latest adjustment of items that are being tariffed, an indication the administration is attuned to concerns about rising costs.

The official played down concerns Tuesday’s moves would raise costs for Americans, noting the goods account for 0.1 percent of U.S. consumption, and the moves purposely targeted items where the U.S. has substantial domestic production or can get it elsewhere.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

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