OTTAWA: Just when US trade partners thought it was safe to come out from their hiding places, along comes President Donald Trump to slap a punitive duty on Canada, America’s long-time ally and neighbour — imposing tariffs of up to 24 per cent on imports on its softwood lumber. The new president seemed to have gone quiet on his protectionist instincts, pulling back from a trade confrontation with China and praising the US trade relationship with Canada when he met Canadian prime minister Justin Trudeau in February. “Markets had been lulled into a false sense of security after Trump’s retreating from harsh China rhetoric and broader legislative failures,” says Peter Rosenstreich, forex strategist at the online bank Swissquote. Investors have duly taken note. The Canadian dollar, aka the “loonie”, dropped 1 per cent to its lowest level in four months against its US counterpart. The Mexican dollar, another neighbour with much to lose from US protectionism, has fallen 1.8 per cent since the start of the week, having this year recovered much of its post-election losses.
The peso is the best-performing major currency in 2017, gaining 9.6 per cent — while the Canadian dollar is down 1 per cent on the year so far. For all his legislative problems, Mr Trump’s executive action demonstrated “the ease in which he can enact punitive trade policy”, Mr Rosenstreich points out. Are these the first shots in the trade war feared by markets? Logs, pulpwood and other forestry products make up only 0.2 per cent as a proportion of total Canadian exports, says RBC Capital Markets. The size of tariff came in at the lower end of RBC analysts’ expectations and, together with as yet unannounced anti-dumping duties, will not be confirmed until January. But investors are less concerned about the specifics of these duties as what they signal.
