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Trump says Canada’s been ‘very rough’ on the U.S. Is he right?

President Trump and Canadian Prime Minister Justin Trudeau meet in February. (Saul Loeb/AFP/Getty Images)

The White House launched a rhetorical fusillade against its close ally and neighbor on Tuesday, accusing Canada of “rough” trade practices that have hurt American workers and farmers.

The anti-Canada invective — reinforced by U.S. announcements of sweeping tariffs on Canadian lumber imports — have few parallels in modern history and brought an immediate rebuke from the other side of the border, triggering fears of a trade war between two major economies.

In a sharp pivot from his earlier criticism of China and Mexico for their trade practices, President Trump suggested that Canada’s benign image was deceptive and that the country’s policies were damaging and unfair to the United States.

“People don’t realize Canada’s been very rough on the United States. Everyone thinks of Canada being wonderful and civil,” Trump told a roundtable of farmers at the White House. “I love Canada. But they’ve outsmarted our politicians for many years, and you people understand that.”

Canadian Prime Minister Justin Trudeau, who has been criticized at home for courting Trump during a visit to the U.S., said the country would protect its industries. “I’m polite, but I’m also very firm in defending Canada’s interests,” Trudeau told the broadcaster CTV.

The rhetorical divide carried over to a telephone call between the two leaders later Tuesday.  The statement from the prime minister's office mentioned "baseless allegations" from the U.S. commerce department and its decision to impose "unfair duties". The White House in a brief statement said: "It was a very amicable call."

Trump’s comments earlier in the day followed a 45-minute, televised excoriation of Canadian trade practices by Commerce Secretary Wilbur Ross, as well as an announcement of new tariffs targeting Canada’s important lumber industry.

Ross, who appeared at the White House press briefing, took a hard line against Canadian trade policies regarding dairy and lumber — the two commodities at the heart of the trade dispute.

“They are a close ally. They’re an important ally. They’re generally a good neighbor,” the commerce secretary said. “That doesn’t mean they don’t have to play by the rules.”

Ross said the disputes also illustrated the problems with NAFTA. "If you think about it, if NAFTA were functioning properly you wouldn’t having these kinds of very prickly, very unfortunate developments back-to-back.  So in that sense it shows that NAFTA has not worked as well as it should," he said.

The escalation of rhetoric represented the biggest breach in relations since 2003, when Canada said it would not take part in the U.S.-led invasion of Iraq.

And it raised concerns about unintended consequences on both sides of the border. Canadian officials warned that U.S. home builders could be hit hard by the new lumber tariff because it could increase the cost of supplies they use for construction.

“It’s not the issues that are surprising — it’s the rhetoric, the animosity, the off-the-cuff remarks about American allies that in no way help us or the U.S.," said Donald Abelson, who chairs the political-science department at Western University in Ontario. " . . . Seems to believe it's perfectly acceptable to hit American allies over the head with a hammer.”

But the Trump administration’s newly aggressive rhetoric earned praise from Republican and Democratic lawmakers in lumber and dairy states.

Sens. Amy Klobuchar and Al Franken, both Minnesota Democrats, celebrated the lumber tariffs as “welcome relief” to workers and rural communities in their state. In Wisconsin, Gov. Scott Walker (R) praised the move to protect the state’s dairy farmers.

Canadian lawmakers have also begun to dig in. During a technical briefing Tuesday, some Canadian officials raised the possibility of a legal challenge to the softwood-lumber tariff under the North American Free Trade Agreement or the World Trade Organization, although neither could happen until 2018, after the Commerce Department makes its final determinations.

Tuesday’s exchanges capped a week of barbed comments from Trump and other officials about Canada’s marketing and trade policies.

Trump has said he intends to renegotiate NAFTA, the pact that has governed commerce across the border for more than 20 years. However, he has yet to take the formal step of notifying Congress he intends to reopen the deal.

The president has been ramping up his rhetoric against Canada for a week, telling a gathering in Wisconsin last week that Canada’s dairy trade policies were “very unfair” and promising to change them.

On Monday, meanwhile, the Commerce Department slapped Canadian softwood lumber with tariffs of up to 24 percent.

Markets reacted immediately, with the Canadian dollar falling to its lowest value in more than a year.

The tough talk from the White House — just two months after Trudeau’s cordial visit to Washington — was a surprising turn for a bilateral relationship that Canadian Ambassador David MacNaughton recently called “a model to the world.”

It also risks straining the United States' relationship with one of its most important trading partners.

Trudeau warned Tuesday that both countries would be hurt by protectionist trade policies.

“We are tremendously interconnected in our economy with that of the United States,” Trudeau said. “But it’s not just a one-way relationship. . . . You cannot thicken this border without hurting people on both sides of it.”

The showdown has its roots in two conflicts, one involving Canadian exports of softwood lumber and the other involving Canadian imports of a dairy product called ultra-filtered milk.

The dispute over ultra-filtered milk began last year, when dairy farmers in Canada’s largest province, Ontario, adopted a new pricing scheme that priced out U.S. competitors.

As a result of the price change, several dairy processors in the United States lost their contracts with Canadian cheesemakers. One of those dairy processors then went on to cancel its contracts with 75 Wisconsin farmers — although some of the farmers have found new markets.

The dispute over softwood lumber has been raging for decades. The U.S. lumber industry has long complained that Canada subsidizes its producers by selling them cheap wood from government land, an arrangement that rises from the fact that most Canadian forests are government-owned.

On four occasions since the 1980s, the United States has responded to these alleged subsidies by imposing what is known as a “countervailing duty tariff” — a tax meant to offset the subsidy and bring lumber prices up to market levels.

The last time such a tariff was imposed, in 2001, Canada took the issue to the WTO and won. One of Trump’s top economic advisers, Peter Navarro, has called the WTO decision “unfair.”

The Canadians “have played us,” he told The Washington Post earlier this year.

More recently, the Obama administration began its own investigation into the alleged subsidies, responding to requests from lawmakers in lumber-producing states. The investigation concluded this week with the Commerce Department announcing a “countervailing duty” of roughly 20 percent. That could amount to $1 billion in tariffs.

More from Wonkblog:

'Another bad act on the part of the Canadians': Trump administration launches punitive tariffs on Canadian lumber

Trump's sudden preoccupation with Canadian milk, explained

Trump has singled out Mexico. But some say NAFTA's real challenge is to the north