Canadian and American flags are pictured at Peace Arch Historical State Park at the USA-Canada border as Canada reopens for non-essential travel to fully-vaccinated Americans in Blaine, Washington on Aug 9, 2021.
(JASON REDMOND / AFP)
OTTAWA – Canada dramatically hardened its tone with Washington in a dispute over proposed US credits for electric vehicles on Friday, threatening to slap tariffs on a range of American goods unless the matter was resolved.
In a letter to senior members of the US Senate, Finance Minister Chrystia Freeland and Trade Minister Mary Ng also said Canada was ready to launch a dispute settlement process under the US-Mexico-Canada (USMCA) trade deal.
READ MORE: Canada, US in 'extremely intense' talks on NAFTA
Canada fears the tax credit for American manufacturers will undermine its own efforts to produce electric vehicles in Ontario — the country's industrial heartland — and also undermine the integrated North American auto industry.
If the matter was not resolved "Canada will have no choice but to forcefully respond by … applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the US economy," two ministers said
"We are writing to register our objection in the strongest terms," said the letter, which emphasized that the government of Prime Minister Justin Trudeau did not want a confrontation.
If the matter was not resolved "Canada will have no choice but to forcefully respond by … applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the US economy," the two ministers continued.
In previous trade disputes between the two close neighbors and trading partners, both sides have slapped sanctions against a wide range of goods.
Ottawa is preparing to publish a list of US products that may face Canadian tariffs, Freeland and Ng said, adding that Canada might also suspend dairy quotas for US producers it agreed to under the USMCA, the letter said.
Months of lobbying has done little to dissuade US legislators, who are considering a new $12,500 tax credit that would include $4,500 for union-made US electric vehicles.
In the letter, Freeland and Ng said the proposal was equivalent to a 34% tariff on Canadian-assembled electric vehicles and represented a significant threat.
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The White House says President Joe Biden considers the tax credits a personal priority and that the administration does not view them as a violation of the USMCA. Officials have said they hope to work to resolve the dispute with both Canada and Mexico, which also opposes the credit proposal.
As recently as last Friday, Ng had said Canada still had some room for maneuvering before the US Senate voted. read more
Asked why Canada had hardened its tone, Ng spokeswoman Alice Hansen said: "We have always made clear we will stand up for the Canadian auto industry. This is the next step."