Feds dead set against 'ridiculous' quotas to replace steel, aluminum tariffs

Canada is not about to agree to quotas or other limits on its exports in order to get the United States to lift punishing tariffs on steel and aluminum, says a source close to the ongoing talks to resolve the lingering tit-for-tat trade standoff.

Where the two sides ultimately end up remains to be seen, but the Canadian source speaking on condition of anonymity in order to discuss sensitive negotiations described the idea of a quota system as a non-starter and a concession that Canada is not prepared to make.

"They're trying to get us to agree to a quota system, which we're not going to do, because it's ridiculous," said the source.

"They know what they need to do to get a deal. The ball is entirely in their court."

Other sources briefed on the talks, however, say quotas are indeed on the table as the two sides work towards getting the tariffs lifted before voters in the U.S. head to the polls for pivotal midterm elections Nov. 6 that could, depending on the outcome, have ramifications for the U.S.-Mexico-Canada Agreement.

Donald Trump imposed the so-called Section 232 tariffs 25 per cent on steel and 10 per cent on aluminum back in June on national security grounds.

But the levies, which the U.S. president has acknowledged publicly helped to expedite the new North American trade deal known as USMCA, did not go away when the agreement was reached recently at the 11th hour.

Trump's now-infamous potshots at Canada, a fixture of his rally speeches and news conferences while the trade talks were ongoing, have largely been replaced by domestic political rhetoric as he ventures into the U.S. heartland, desperate to preserve Republican control of Congress.

But the anti-Canada commentary has not disappeared entirely.

In remarks to a dinner audience on Capitol Hill this week, Trump economic adviser Larry Kudlow related a story in which an unidentified White House official described Prime Minister Justin Trudeau as "that punk little kid running Canada."

And a CBC report quoted Zekelman Industries chairman and CEO Barry Zekelman Canadian-born, but head of a U.S.-based steel pipe and tube conglomerate and unabashed champion of American steel interests telling a Commons committee that Foreign Affairs Minister Chrystia Freeland is "way out of her league."

Carlo Dade, head of the Calgary-based Canada West Foundation, said it's clear that there's a degree of persistent cross-border animosity, particularly on the part of the office of the U.S. Trade Representative.

"The USTR really does not like Canada," Dade said. "They've got a hate on for us, and they've had a hate on for us for a long time."

Not so, said the source, who's convinced that it's all part of the Trump-fuelled U.S. negotiating playbook.

"It's all pretty transparent they're doing exactly the same thing" they did during the NAFTA talks, the source said.

"They've got their spokespeople out there calling us names, and their steel people out there attacking Chrystia.... I think a lot of this is just show business."

There is, however, a burning economic imperative: the mutually assured destruction of U.S. tariffs and Canadian dollar-for-dollar countermeasures on nearly $13-billion worth of trade, a stalemate that is making itself felt on both sides of the border.

With the midterms looming, Republican Senate majority leader Mitch McConnell has been urging the White House to resolve matters sooner rather than later, given the impact that retaliatory tariffs from Canada, Mexico, China and the European Union are having in the U.S. including his home state of Kentucky.

"There is a strong call in the heartland for the president to lift those tariffs and end the retaliation by Mexico and Canada, particularly the countermeasures against U.S. farm country," Dan Uczjo, an Ohio-based international trade lawyer and partner with Dickinson-Wright, said in an email.

"It is our understanding that the president is hearing about the pain inflicted by these tariffs as he hits the campaign circuit in Iowa, Ohio and other U.S. battleground regions."