Trudeau, Canadian Prime Minister Spar on Using Resources as a Trade Weapon

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(Bloomberg) — Prime Minister Justin Trudeau and Canada’s provincial premiers are in a heated debate over how far to go in using oil and other commodities as a weapon if the U.S. starts a regional trade war.

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Trudeau is meeting with leaders of Canada’s 13 states and territories in Ottawa on Wednesday, trying to get on the same page about how to respond if US President-elect Donald Trump follows through on his pledge to impose 25% tariffs on all US goods. goods from Canada.

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The prime minister and the prime minister are preparing a list of retaliatory tariffs. The administration has also explored the possibility of tougher measures, such as imposing export tariffs on oil, uranium and potash to raise costs for US consumers and businesses in case Trump starts an endless trade war.

The premiers of Alberta and Saskatchewan — the two largest producers of the commodity — oppose that idea.

In his opening speech, Trudeau emphasized the positive message, saying that Canada and the US have opportunities to build a “partnership” in energy. Canada has the essential minerals needed to fuel the technological revolution in the American economy, the prime minister said.

“If they can’t find them in Canada, they will find them in China.” “If they can’t get them in Canada or China, they can’t get them anywhere,” Trudeau said. But he also said that the retaliatory rates are on the table and will be discussed at the meeting.

Ontario Premier Doug Ford, who came to the meeting wearing a green hat emblazoned with the words “Canada Don’t Sell Out,” said he was a “strong believer” in retaliatory spending.

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“You can’t let someone hit you on the head with a hammer without retaliating twice in my opinion,” he said.

Both Ford and the premier of Quebec, Francois Legault, said everything was on the table in response to Trump’s tax. “There are many situations that we can look at, but we are not saying anything because the impact that these costs can have is big,” said Legault.

Canada exports about 4 million barrels of oil a day to the US, and its heavy crude is sold at a discount to West Texas Intermediate, the benchmark for American oil. Fossil fuels are such a large part of trade between the two countries that they tip the trade balance – the US would actually have a trade surplus with Canada if not for energy.

Canadian uranium is also a major foreign source of fuel for US nuclear power plants, and potash from the western states is a major source of fertilizer for American farms. The export tariffs will be designed to increase the pain for American consumers to pressure Trump to raise tariffs immediately.

Scott Moe, the premier of Saskatchewan, home to important uranium and potash deposits, said on his way to the meeting that an export tax “would be counterproductive” and that the focus should be on avoiding and reducing tariffs.

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“It’s not going to be easy to get this conversation back to where it needs to be,” Moe said.

Energy is “Canada’s queen in this chess game,” said Andrew Furey, premier of the east-coast province of Newfoundland and Labrador, which also has significant oil reserves.

“There is no need for us to reveal our queen in advance. “The opposition parties need to know that the queen is there, but they don’t need to know what we are going to do with the queen,” said Furey.

“So let’s see what the prices actually are first, and have a balanced – but let me be very clear – strong response in the United States. We do not need to shape or allow the urgency of this economic and financial crisis to endanger our nationality, or our national unity.”

The threat of tariffs also brought to light long-standing frustrations that Canada does not refine much of its oil domestically and recently completed a pipeline expansion to serve Asian markets. Northwest Territories Premier RJ Simpson has urged the country to increase its ability to refine oil and precious minerals domestically, and diversify its trading partners.

“Why are we in this situation?” he asked. “Why do we have an economy that can be crushed at the whim of the president?”

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