The proposed package of penalties, which could foment a more adversarial trade relationship with China, comes amid a report from Reuters that the Trump administration is also seeking to impose heavy new tariffs on China.
Global trade lawyer Larry Herman says Canada can do several things, including promising temporary surcharges under the Customs Tariffs Act on any country found to be dumping steel, as well as tightening up the system that issues permits for steel imports, which he says is more a formality than a check on the system at the moment.
Trade Commissioner Cecilia Malmstroem held talks on Saturday with U.S. Trade Representative Robert Lighthizer in an effort to understand Trump's exemptions, but she said she got "no immediate clarity on the exact U.S. procedure".
Brazil, which is the second biggest supplier of steel to the U.S. after Canada, is said to be "exploring alternatives" for responding to the tariffs. The hardball measure would come on top of restrictions on steel and aluminum imports.
"The bigger concerns are retaliatory tariffs against US exports, the possibility of a broader trade war, higher costs, and greater uncertainty for global business investment". European Commission President Jean-Claude Juncker responded with a list of threatened tariffs on U.S products, lamenting: "This is basically a stupid process".
The American brand at the centre of the current spat, Harley Davidson, sells thousands of motorbikes a year across Europe, and would struggle if targeted tariffs against its US-manufactured products were introduced.
President Donald Trump said the tariffs, due to take effect in late March, are needed to protect USA workers. We both benefit from our transactions, but they benefit more than we do.
Trump has also tweeted a trade war is easily winnable. Those things we're prepared to do. Here's what you need to know. "I expect that Canada and Mexico will take action to prevent transshipment of steel articles through Canada and Mexico to the United States", he wrote.
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A China-based business source with knowledge of discussion among senior European officials said there had been a "clear effort" by the U.S. government over the past six months to introduce a coordinated approach to Chinese industrial policy, but that Trump's proposed metals tariffs under section 232 of the Trade Expansion Act of 1962 had undermined support from Europe.
Steadily rising Chinese production increases pressure for mills to export, putting downward pressure on prices and undercutting exports from American, European, Japanese and Korean mills. So Europe can continue with its higher tariffs on US cars, so long as it does the same to Japanese cars.
This form of processing allows it to be stamped "made in Canada" and could avoid the US tariff, which is why the federal enforcement officials will need to identify the country of origin of the original steel, said one industry executive who asked that his name not be used because he is not authorized to speak to the media.
Steel producing countries worry not just about lost sales in the US, but also that steel from other exporting nations will flood in.
However, the fact is that we are already in a trade war; we have been it for many years; and we are losing it.
While there will be initially "higher import prices and substitution toward higher domestic prices", that will be followed by disinflationary effects when tariffs diminish demand, said Derek Holt, an economist at Scotiabank in Toronto. Standing with Trump are workers, left, Vice President Mike Pence, Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross. Their version stripped out some of the conditions won by US negotiators, such as increased intellectual property protections for pharmaceuticals.
Canada sent troops into the losing Afghan War to persuade the Americans to keep the border open to trade. "Although the Chinese economy was growing by 8.7 percent, the Chinese government managed to shrink Chinese imports of American goods and services".
The writer is blog editor for the United Steel Workers.