LDN - Business

As Trump attacks, Canada goes to Plan B: same as Plan A

[June 12, 2018] By David Ljunggren

OTTAWA (Reuters) - U.S. President Donald Trump's blistering attack on Canadian Prime Minister Justin Trudeau has driven bilateral relations to their lowest point in decades and left Ottawa with few options for averting a trade war with its much bigger neighbor.

Trump blew apart a G7 summit in Canada over the weekend, blasting Trudeau as "very dishonest and weak" and raising the prospect of tariffs against auto imports, a move that would imperil the Canadian economy.

His unexpected and extraordinary attack flummoxed Canadian officials, who have waged an 18-month campaign designed to cultivate allies among U.S. policymakers and business leaders in defense of Canada's interests.

People close to the situation said they were disappointed the outreach had not been as productive as they hoped. The dispute weighed on the Canadian dollar on Monday.

Ottawa has promised to retaliate against Washington's imposition of tariffs on metals imports from Canada, the largest supplier of steel to the United States. But Canada would face long odds winning a trade war against a country 10 times its size economically and which takes the majority of its exports.

"There is a limit to what we can achieve in Canada. The only people capable of persuading Trump to stop this are in the United States, but they have not hit anything like top gear," said one person close to the matter.

In a sign of how limited their options are, Canadian officials said they planned to press harder with their U.S. lobbying campaign, focused on potentially sympathetic lawmakers outside the White House, while relying on support from allied nations and hoping Trump does not carry out all his threats.

Officials have stressed the two countries' extensive trading relationship and pointed out that Canada is the top export destination for 35 U.S. states and that 9 million jobs in the United States depend on trade with its northern neighbor.

On Sunday, White House economic adviser Peter Navarro, who said there was "a special place in hell" for Trudeau, criticized the government's outreach campaign, saying the Canadians should "spend more time at the bargaining table and less time lobbying Capitol Hill and our press and state governments."

Canada's limited options mean "there is no magical Plan B," said University of Ottawa international affairs professor Patrick Leblond.

NEED ALLIES

Trump and his deputies lashed out at Trudeau for telling a news conference at the end of the G7 conference that Canada would not be pushed around on tariffs - a point the Canadian prime minister had made several times before.

"This has to be a political play. They surely cannot be that upset about what the prime minister said," according to a second Canadian official.

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Canada's Prime Minister Justin Trudeau takes part in a news conference in Ottawa, Ontario, Canada, May 31, 2018. REUTERS/Chris Wattie/File Photo

Trudeau himself sidestepped questions about the attacks from Washington.

"We are not going to get involved in insults," said a person

close to the prime minister. "We will continue to reach out and find people to speak to."

Senior U.S. policymakers such as House of Representatives Speaker Paul Ryan have raised concerns with the White House about fellow Republican Trump's trade policies, most recently the decision to impose the steel and aluminum tariffs.

Republican Senator Bob Corker said legislation would be introduced this week that would force Trump to obtain congressional approval before imposing tariffs on national security grounds.

But the response by U.S. lawmakers, business executives and officials falls short of the concerted and effective nationwide pressure campaign Canadian officials had hoped would be launched if a major threat developed.

A spokesman for Canadian Foreign Minister Chrystia Freeland said the government had built "valuable relationships" in the United States, from the administration to organized labor and would continue its outreach.

One new reason for optimism in Ottawa is a new-found strength in numbers. Trump's steel and aluminum tariffs united the European Union, Canada, Mexico and Japan, which all vowed retaliatory measures. The countries coordinated closely on their response, Freeland said.

"Our economy is much smaller than that of the United States, which is why it was so important that other allies signed on," said the second official.

Domestically, Trudeau has also received support from all corners, and is backed by all opposition parties.

Trump's unpredictability and his history of not following through on all his threats lead some in the Canadian government to believe he might pull back from the auto tariffs threat.

"He talked about a border tax and didn't impose it. He's talked about pulling out of NAFTA but hasn't done so," noted the first source. "So we can always hope."

(Reporting by David Ljunggren; Editing by Peter Cooney)

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