CANADA ECONOMICS

INTERNATIONAL TRADE

Global Affairs Canada. March 1, 2018. Statement by Canada on steel and aluminum
Statement

Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:

“As a key NORAD and NATO ally, and as the number one customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable.

“Any restrictions would harm workers, the industry and manufacturers on both sides of the border. The steel and aluminum industry is highly integrated and supports critical North American manufacturing supply chains. The Canadian government will continue to make this point directly with the American administration at all levels.

“Canada is a safe and secure supplier of steel and aluminum for U.S. defence and security.  Canada is recognized in U.S. law as a part of the U.S. National Technology and Industrial Base related to national defence.

“The United States has a $2-billion surplus in steel trade with Canada. Canada buys more American steel than any other country in the world, accounting for 50% of U.S. exports.

“It is entirely inappropriate to view any trade with Canada as a national security threat to the United States.  We will always stand up for Canadian workers and Canadian businesses.  Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

The Globe and Mail. 2 Mar 2018. U.S. unveils steep tariffs, raising peril of trade war. Ottawa vows to retaliate if steel, aluminum from Canada included
STEVEN CHASE, OTTAWA
GREG KEENAN, TORONTO
ADRIAN MORROW, MEXICO CITY

U.S. President Donald Trump is firing the first shot in what could amount to a global trade war, announcing plans to slap hefty tariffs on foreign imports of steel and aluminum as a means of protecting American jobs.

The Canadian government was quick to threaten retaliation against the United States if steel and aluminum from Canada are included in the Trump trade action.

Mr. Trump said Thursday that he intends to levy 25 per cent tariffs on steel imports and 10 per cent on aluminum imports, sending U.S. stock markets tumbling over fears of global retaliation and higher inflation.

“We’re going to build our steel industry back and our aluminum industry back,” he said of the measures, which his administration has defended as necessary for national security, including the building of ships and tanks.

Mr. Trump said the measures will not be formally unveiled until next week. These measures could also exacerbate the already-strained renegotiation of the North American free-trade agreement. In NAFTA talks, Canada and Mexico are fighting a series of protectionist demands from the Trump administration. The U.S. move threatens to overshadow those talks in Mexico City, which are in their seventh round since the United States notified its partners last year that it wants to renegotiate the deal.

Despite the Canadian threat, The New York Times reported on Thursday that no countries will be exempted from the tariffs, made under the obscure national-security provisions of the 1962 Trade Expansion Act. That’s different from 2002 when Canadian imports were exempted from temporary steel tariffs of 8 per cent to 30 per cent imposed by George W. Bush’s administration.

Within hours of Mr. Trump’s announcement, Canadian Foreign Affairs Minister Chrystia Freeland issued a public warning to the United States that Ottawa would strike back if Mr. Trump slaps tariffs on Canadian-made steel and aluminum.

Ms. Freeland said Canada believes the United States has no justification to include its neighbour and military partner in a crackdown on foreign metal imports.

“As a key NORAD and NATO ally, and as the No. 1 customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” Ms. Freeland said. “It is entirely inappropriate to view any trade with Canada as a national-security threat to the United States. We will always stand up for Canadian workers and Canadian businesses. Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

U.S. tariffs could damage Canada’s steel and aluminum industry, affecting 22,000 direct jobs in steel and 10,000 in aluminum. Producers will also have to cope with what trade experts warn will be a wave of foreign imports diverted away from the United States by the American tariffs.

Ms. Freeland did not say what form of retaliation Canada may take.

International trade lawyer Lawrence Herman said it could include imposing surcharges or restrictions on American imports.

The Trump measures could spark a global trade war, he said. “This is the first unilateral, global trade action by Trump affecting key industrial products. Other governments besides Canada will certainly respond. This will have worldwide repercussions, with potentially damaging effects on the world trading order generally.”

The 28-member European Union quickly vowed to impose countermeasures on the United States.

Mr. Trump made his announcement after the U.S. Commerce Department recommended tariffs to protect two key U.S. manufacturing industries that have been hit hard by cheap imports from China.

Canadian officials could not say on Thursday whether Canada has been exempted, but one senior official said they believe this country, along with Britain and Australia, have a good case to be excluded because they form part of the defence industrial base of the United States.

Ottawa and executives from the steel and aluminum industries pushed hard for an exemption for Canada, given that U.S. tariffs are being imposed for reasons of national security and that Canada is a close U.S. ally.

Canada is the largest supplier of both steel and aluminum to the United States. Shipments from Canadian mills are about 6 per cent of the U.S. steel market. Aluminum producers in Canada ship more than 2.3 million tonnes to U.S. customers annually.

Industry and union officials on both sides of the border said on Thursday that they were not sure if Canada had won an exemption that Canadian officials have been urging for months.

The United Steelworkers, which represents workers at mills on both sides of the Canada-U.S. border, will fight to get Canada excluded from the trade actions, Leo Gerard, the Canadian-born president of the union said in an interview from Pittsburgh.

“Canada’s not a problem,” Mr. Gerard said. “It’s not a problem factually; it’s not a problem ideologically.”

The steel and aluminum action also comes amid a series of other trade disputes between Canada and the United States – on softwood lumber and government financial support for airplane maker Bombardier Inc. – that have caused Canada to make a wide-ranging complaint to the World Trade Organization about U.S. trade practices and remedies.

The tariffs are expected to increase the prices in North America of motor vehicles, appliances, construction equipment and military hardware.

Some steel-industry officials fear that dumping of cheap foreign steel in Canada will increase once the U.S. tariff wall is constructed.

“Canada has to make a similar announcement or imports will be diverted here,” said Barry Zekelman, chief executive of Zekelman Industries, which owns steel-tube producers JMC and Atlas Tube.

Canada’s argument for exemption largely hinges on how integrated the U.S. and Canadian steel industries are – saying that hitting Canada with tariffs would hurt the United States – as well as how integral Canadian steel is to the U.S. military-industrial complex.

“The trickle effect on parts and cars that cross the border means we all get punished with higher costs,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada.

One auto industry source said the White House has privately indicated that it does not want to give Canada an exemption from the tariffs.

A steel-industry source said the White House had not told the industry definitively whether it would grant exemptions to any country, but appeared to be leaning toward not granting any.

In fact, the source said, the industry did not even know the tariff announcement was coming until Mr. Trump made it. Industry members received invitations to Mr. Trump’s event late on Wednesday. By Thursday morning, they understood the event to be purely a roundtable discussion with no announcement. It was not until Mr. Trump revealed the tariffs near the end of the event that the industry knew about them, the source said.

The Globe and Mail. 2 Mar 2018. Fears of tariff retaliation send markets tumbling. Stocks slide after White House announces plans for duties on steel, aluminum. Rates: Canadian stocks also affected by tariff announcement
DAVID BERMAN

While the announcement sent the shares of U.S.-based steel producers higher, it walloped the broader market.

Stocks tumbled on Thursday after U.S. President Donald Trump announced plans to impose tariffs on imported steel, raising the prospect of retaliation by China and Europe as well as concerns about higher U.S. inflation and interest rates.

Mr. Trump said he would sign off next week on measures that would impose a tariff of 25 per cent on imported steel and 10 per cent on imported aluminum, citing U.S. national-security interests.

“We’re going to build our steel industry back and our aluminum industry back,” Mr. Trump said.

But while the announcement sent the shares of U.S.-based steel producers higher, it walloped the broader market.

Nucor Corp. rose 3.3 per cent and United States Steel Corp. rose 5.8 per cent, as investors bet that U.S.-produced steel volumes will rise if imported steel is rendered less competitive.

The combined value of these two companies rose by more than US$1.1-billion, after Mr. Trump made his announcement at the end of a meeting with executives from the U.S. steel and aluminum industries.

Yet, the gains were more than offset by the broader decline in the S&P 500, which fell 1.3 per cent. The downturn eliminated about US$300-billion from the index’s total market capitalization, underscoring economic concerns about the impact of trade protectionism.

Aerospace giant Boeing Co. was a key casualty from the tariff decision. The shares fell 3.5 per cent, knocking about US$7.4billion from its market capitalization – or nearly seven times what the steel companies gained.

The volatility comes amid a sensitive time for stocks in general.

The strength of the U.S. economy, along with low unemployment and rising wages, has supported expectations that the U.S. Federal Reserve will raise its key interest rate at least three times this year.

Rate increases can make stocks less attractive relative to bonds, but tighter monetary conditions can also raise borrowing costs and weigh on corporate profitability.

These concerns walloped stocks last month, when the Dow Jones Industrial Average on two occasions fell more than 1,000 points. Both the Dow and the S&P 500 suffered an official stock-market correction in February, defined as a total drop of at least 10 per cent.

Thursday’s decline suggests investors are concerned that rising tariffs may exacerbate the root causes of recent volatility: If manufacturers end up paying more for higher-priced U.S. domestic steel and aluminum, inflationary pressures will increase, prompting a further monetary policy response from the Fed.

A trade war with Europe or China could make matters even worse.

Andrew Hunter, an economist at Capital Economics, noted that domestic U.S. steel prices have already risen by 20 per cent since the start of this year in anticipation of protectionist measures from the Trump administration.

He argued that a further rise in domestic steel production could worsen labour and material shortages and push prices even higher.

“As a result, we suspect that the hit to other industries from higher prices will outweigh any boost to domestic steel and aluminum producers,” Mr. Hunter said in a note.

“The Fed will presumably look through the temporary impact on inflation from higher imported steel prices, but it will find it harder to ignore any resulting upward pressure on wages and prices,” Mr. Hunter said.

The S&P 500 closed at 2,677.67, down 36.16 points or 1.3 per cent.

The Dow Jones Industrial Average closed at 24,608.98, down 420.22 points or 1.7 per cent, marking its biggest one-day decline since Feb. 8, when it shed 1,032 points.

Canadian stocks were also affected by the tariff announcement. The S&P/TSX Composite Index fell 48.73 points or 0.3 per cent, to 15,393.95.

Stelco Holdings Inc. fell 5.1 per cent on concerns that the Canadian steel producer may face tariffs, although Mr. Trump has not yet announced which countries will be affected.

Economists at CIBC World Markets expect that tariffs will also slow the Canadian economy, potentially sidelining further interest-rate hikes by the Bank of Canada.

“If these plans move forward with Canada explicitly included, expect some further depreciation of the Canadian dollar,” Royce Mendes and Avery Shenfeld said in a note.

“But given the negative impacts on economic growth, the Bank of Canada is likely to tolerate the inflation coming from Canadian-dollar weakness, so over all, a tariff war leans towards a more patient central bank in terms of additional rate hikes.”

THE GLOBE AND MAIL. MARCH 2, 2018. INTERNATIONAL TRADE. Trudeau says Trump tariff plan ‘unacceptable’; urges exemption
STEVEN CHASE, OTTAWA

Prime Minister Justin Trudeau is making the case publicly on why Canada should be exempt from new protectionist tariffs announced by Donald Trump.

He says Canada is no threat to American steel or aluminum industries because it's a key military ally that forms part of the defence industrial base and buys more American steel than it sells to the United States.

Mr. Trudeau ticked off the reasons for exempting Canada Friday in comments to reporters following a visit to central Ontario.

He offered statistics to support his argument, saying Canada buys billions of dollars more in steel from the United States than it ships to American buyers.

"The United States has a $2-billion surplus on steel with us," he said. "So we regard the imposition of any tariffs on steel or aluminum between our two countries as absolutely unacceptable." (Canadian officials have said the figure is U.S. dollars).

Part of the reason for Canada's steel purchases from the United States is Canadian auto makers buy large amounts of U.S.-made hot-rolled coil steel for their production lines, according to international trade lawyer Lawrence Herman.

Mr. Trump announced he intends to slap 25-per-cent tariffs on foreign steel imports and 10 per cent tariffs on foreign aluminum imports, citing national security requirements. His administration says this is necessary to assist in the construction of warships and tanks.

Details of the Trump tariffs have yet to be released and it's still unclear whether the United States intends to exempt Canada.

Mr. Trudeau did not answer a reporter's question Friday on whether Canada will be exempted from the tariffs. On Thursday after the tariffs were announced, Canadian officials were unable to say whether Canada has obtained an exemption.

The prime minister instead underlined how closely Canada co-operates with the United States, not only on supplying product for U.S. construction but also through the North American Aerospace Defense Command and the North Atlantic Treaty Organization.

"The level of co-operation and integration of our militaries, our defence of North America, and our working together on a broad range of security issues means that it makes no sense to highlight that Canadian steel or aluminum might be a security threat to the United States," the prime minister said.

He said he has previously made the case directly to Mr. Trump for an exemption from steel and aluminum tariffs.

Mr. Trudeau said his government will continue to press American government representatives on the matter.

Mr. Trump on Thursday fired the first shot in what could amount to a global trade war, announcing plans to slap hefty tariffs on foreign imports of steel and aluminum as a means of protecting American jobs.

The Canadian government was quick to threaten retaliation against the United States if steel and aluminum from Canada are included in the Trump trade action.

These measures could also exacerbate the already-strained renegotiation of the North American free-trade agreement. In NAFTA talks, Canada and Mexico are fighting a series of protectionist demands from the Trump administration. The U.S. move threatens to overshadow those talks in Mexico City, which are in their seventh round since the United States notified its partners last year that it wants to renegotiate the deal.

Despite the Canadian threat, The New York Times reported on Thursday that no countries will be exempted from the tariffs, made under the obscure national-security provisions of the 1962 Trade Expansion Act. That's different from 2002 when Canadian imports were exempted from temporary steel tariffs of 8 per cent to 30 per cent imposed by George W. Bush's administration.

The 28-member European Union quickly vowed to impose countermeasures on the United States.

THE GLOBE AND MAIL. MARCH 2, 2018. INTERNATIONAL TRADE. China shrugs off ‘stupid trade protection measure’ by U.S.
NATHAN VANDERKLIPPE, BEIJING

The U.S. plan to slap punitive new tariffs on steel and aluminum amounts to a "stupid trade protection measure," one of China's largest industry groups said Friday, as the world's second-largest economy confronted looming new barriers to its product across the Pacific.

China makes roughly half the world's aluminum and steel, and is a large exporter of both.

U.S. President Donald Trump on Thursday pledged 25-per-cent tariffs on imports of steel and 10 per cent on aluminum, an act that stoked trade-war fears and hurt markets across the globe. The Nikkei 500 and Hong Kong's Hang Seng Index both dropped 1.6 per cent Friday. Markets in Shenzhen and Shanghai also retreated, and analysts issued dark warnings about the consequences of hurting global trade sensitivities, and the revenge Beijing can take.

But China's vast metals complex reacted largely with a shrug to Mr. Trump's pledge to exact punishment for industrial overcapacity.

Though China's metal exports have surged in recent years as domestic demand slowed, just a sliver of those shipments land on U.S. shores. The U.S. is only the 26th-largest buyer of Chinese steel, importing just 1 per cent of China's exports last year.

China is the fourth-largest source of overall U.S. aluminum imports, supplying 9 per cent of the total (Canada is 42 per cent), according to data from research consultancy Wood Mackenzie. But China is the top foreign source of aluminum products such as sheets and foils into the United States, and the new tariffs will cause a "blow," said Kamil Wlazly, a senior research analyst with the firm.

"The unprecedented increase in imports of light- and medium-gauge foils from China over the past decade has forced many U.S. foil producers to delay investment or suspend operations," he said. In the U.S. "well-thought trade restrictions on imports of Chinese downstream products would encourage domestic demand and investment."

The Aluminum Association in the U.S. has argued that "subsidized production in China, which is leading to unfair and illegal trade practices, threatens the industry's continued health."

And the new tariffs "will have a negative effect on us, for sure, because it's a matter of cost," said Bai Qi, marketing manager at Huayu Hengmei Aluminum Ltd. Corp. in China's Henan province, which exports to the U.S.

But Ms. Bai wasn't particularly worried.

"Our company has started considering new markets that can substitute for the U.S. We haven't come to any conclusion, but I think there will be many." For now, "things are running as usual," she said.

At Dongkuk Steel in Jiangsu, a client manager who gave only his surname, Zhang, was even more sanguine.

"The majority of the steel we produce is exported to South Korea. The share that the U.S. market accounts for is barely noticeable," he said. "So if it becomes difficult, we could just abandon it. It has no effect on our normal production."

The tariffs will merely cause the competitiveness of the U.S. industry to decline, argued the China Iron and Steel Association, which called the measures a "stupid trade protection measure" Friday.

They also risk provoking ugly recriminations from Asia. South Korean President Moon Jae-in in late February called for a "stern" response to any U.S. measures, threatening to complain to the World Trade Organization, or even to look for possible violations of the free-trade agreement between the two countries.

The tariffs Mr. Trump announced Thursday are less punitive than those once feared by South Korea – and the U.S. President may take solace in comments from South Korean steel maker Nexteel Co. Ltd., which told the Yonhap news agency that it has considered moving some of its production lines to the U.S. in response.

Still, Australian Trade Minister Steven Ciobo on Friday said Mr. Trump's move "will do nothing other than distort trade and ultimately, we believe, will lead to a loss of jobs."

In China, meanwhile, new warnings emerged about the revenge Beijing can take.

The U.S. risks "Chinese retaliation and a tit-for-tat trade war, just as the Tariff Act of 1930 did with dark consequences," wrote economic analyst Dan Steinbock in a lengthy commentary published by China Daily this week.

Top trade representatives from both China and South Korea are currently in the United States, hoping to blunt the blow before the tariffs are finalized.

"Exemptions for particular countries may be forthcoming," analysts with BMI Research wrote. But, it warned, "if implemented as announced, retaliatory measures from countries including China, Canada and Mexico could target U.S. industries ranging from agribusiness to aerospace and services."

Indeed, "we firmly oppose this action and will take responsive measures when it's necessary," said a senior official at the China Nonferrous Metals Industry Association, on condition of anonymity because he was not authorized to speak with the foreign press.

"Global trade is an interactive process. I think the Chinese government will take eye-for-an-eye measures in response," he said. "We won't just stay where we are after getting a punch in face."

With a report from Alexandra Li.

THE GLOBE AND MAIL. MARCH 2, 2018. The threat of a trade war
MICHAEL BABAD

Canada and others have said they'll respond to any such move, and the threat alone sent shivers through the markets Thursday.

NAFTA is not yet resolved, and Mr. Trump has threatened to kill it, though observers believe it will survive in a different form. Having said that, Canada has already taken the U.S. to the World Trade Organization over its practices, so it's hardly a cozy relationship.

Now, economists warned, steel and aluminum tariffs would hit Canada hard.



"If implemented, it could represent a stiff blow to Canadian industry," said CIBC's Mr. Mendes and Mr. Shenfeld.

"The country is the largest supplier of both commodities to the U.S. … and, at least for now, there was no mention of any exemption for Canada," they added.

"The lack of any exemption could reflect American concerns that China is dumping certain goods onto the U.S. market, using Canada as a back door, or simply the loss of the special status that the U.S. previously accorded its northern neighbour."



Remember, the U.S. has already hit Canadian softwood lumber, and tried to whack Bombardier Inc.

But where the latest threat is concerned, "the economic effects could be more biting for the Canadian economy than previous moves by the administration," said Mr. Mendes and Mr. Shenfeld.

REUTERS. MARCH 2, 2018. Canada's Trudeau says U.S. tariffs on steel would be 'unacceptable'

OTTAWA (Reuters) - Canada’s Prime Minister Justin Trudeau said on Friday any U.S. tariffs on steel and aluminum imports would be“absolutely unacceptable” and said his government would continue to engage with U.S. officials on the issue.

Officials have not said whether U.S. President Donald Trump’s plan for tariffs of 25 percent on steel imports and 10 percent on aluminum products would include imports from Canada and Mexico.

Reporting by Leah Schnurr; Editing by James Dalgleish

REUTERS. MARCH 2, 2018. 'Trade wars are good,' Trump says, defying global concern over tariffs
Susan Heavey

WASHINGTON (Reuters) - U.S. President Donald Trump struck a defiant tone on Friday, saying trade wars were good and easy to win, after his plan to put tariffs on imports of steel and aluminum triggered threats of retaliation from trading partners and a slide in stock markets.

The European Union raised the possibility of taking countermeasures, France said the duties would be unacceptable and China urged Trump to show restraint. Canada, the biggest supplier of steel and aluminum to the United States, said it would retaliate if hit by U.S. tariffs.

U.S. stock indexes recouped some losses on Friday, but were on track to end the week in the red as investors fretted over a possible global trade war. World equity markets slid further and the U.S. dollar dropped to its lowest point in more than two years against the yen.

Trump said on Thursday that a plan for tariffs of 25 percent on steel imports and 10 percent on aluminum products would be formally announced next week.

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said on Twitter on Friday.

In a later social media post, Trump said his aim was to protect U.S. jobs in the face of cheaper foreign products.

“We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” he wrote.

Many economists say that instead of increasing employment, price increases for consumers of steel and aluminum such as the auto and oil industries will destroy more U.S. jobs than they create.

RETALIATION LIKELY

Major U.S. trade partners are likely to hit back.

Europe has drawn up a list of U.S. products on which to apply tariffs if Trump follows through on his plan.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans - Levi’s,” European Commission President Jean-Claude Juncker told German television.

Trump’s threats to unleash a trade war over steel crushed any hopes of substantial progress in current talks with Canada and Mexico to rework the North American Free Trade Agreement

Canadian Prime Minister Justin Trudeau said any U.S. tariffs on steel and aluminum imports would be“absolutely unacceptable” and vowed to continue to engage with U.S. officials on the issue.

The International Monetary Fund also expressed concern about the proposed tariffs and said they likely would damage the U.S. economy as well as the economies of other nations.

Trump’s announcement came after what one person with direct knowledge of the discussions described as a night of“chaos” in the White House due to frequent switching of positions in the administration.

While Trump often lays out stark policy positions which he later rolls back as part of a negotiating tactic, White House spokeswoman Sarah Sanders said the levels of the planned tariffs were not expected to change.

Capital Alpha Partners, a policy research group in Washington, said a quick reversal by Trump was highly unlikely.

“We also don’t see a chance for fine tuning, exceptions, carve outs, or a country-by-country policy” in the short term, the group said in a research note.“We would be hopeful that the policy could be modified in time.”

The United States is the world’s biggest steel importer, buying 35.6 million tonnes in 2017.

Peter Navarro, a White House adviser with largely protectionist views on trade, brushed off the negative effects of tariffs on U.S. industry.

He said a 10 percent tariff on aluminum would add one cent to the cost of a can of beer, $45 to a car and $20,000 to a Boeing 727 Dreamliner.“Big price effects? Negligible price effects,” he told Fox News.

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But home appliance maker Electrolux (ELUXb.ST) said it was delaying a $250 million expansion of its plant in Tennessee as it was worried U.S. steel prices would rise and make manufacturing there less competitive.

Trump’s administration has imposed a series of trade duties on a range of goods from solar panels to washing machines.

It is even studying whether America’s rubber band makers need protection as he seeks to boost domestic manufacturing and employment. The decision on steel and aluminum was the most wide ranging and provocative to date and there is the prospect of more to come, with the government holding an investigation into alleged theft of U.S. intellectual property by China.

The EU, which sees itself as a global counterweight to a protectionist-leaning Trump, made no mention of retaliation but spoke of countermeasures that conform with World Trade Organization (WTO) rules.

Safeguard measures, last deployed by Europe in 2002 after then-U.S. President George W. Bush imposed steel import duties, would be designed to guard against steel and aluminum being diverted to Europe from elsewhere if U.S. tariffs come in.

But to conform with WTO rules such measures would have to apply to imports from all countries and could also hit producers including China, India, Russia, South Korea and Turkey.

Governor Scott Walker of Wisconsin, a fellow Republican, urged Trump to rethink the tariffs.

“If the president wants to protect good-paying, family-supporting jobs in America, especially here in Wisconsin, then he should reconsider the administration’s position on these tariffs, particularly on ultra-thin aluminum,” Walker said in a statement.

China, which Trump frequently accuses of unfair trade practices, called for restraint from the United States.

“China urges the United States to show restraint in using protective trade measures, respect multilateral trade rules, and make a positive contribution to international trade order,” Foreign Ministry spokeswoman Hua Chunying said.

Although China accounts for only 2 percent of U.S. steel imports, its massive industry expansion has helped produce a global steel glut that has driven down prices.

Economists say that Trump’s own expansionary budget policies will fuel ever larger trade deficits, essentially defeating his stated aim of having“balanced trade” with individual countries.

Additional reporting by Tom Westbrook in Sydney, Tom Daly in Beijing, Philip Blenkinsop and Robert-Jan Bartunek in Brussels, Doina Chiacu, Eric Walsh and Makini Brice in Washington, and Gertrude Chavez-Dreyfuss in New York; Writing by David Clarke and Alistair Bell; Editing by Paul Simao and James Dalgleish

REUTERS. MARCH 2, 2018. Exclusive: EU may target $3.5 billion of U.S. imports for trade retaliation - sources
Philip Blenkinsop

BRUSSELS (Reuters) - The European Union is considering applying 25 percent tariffs on around $3.5 billion of imports from the United States if President Donald Trump carries out his plan to apply global duties to steel and aluminum, EU sources say.

The European Commission has said it would respond“firmly” to proposed U.S. import duties of 25 percent on steel and 10 percent on aluminum.

It has spelt out it would join others in a challenge at the World Trade Organization (WTO) and consider safeguard measures, last deployed in 2002, to guard against steel and aluminum being diverted to Europe from elsewhere if U.S. tariffs come in.

A further counter-measure under consideration would specifically target the United States to“rebalance” trade between the two, EU sources say.

The U.S. tariffs would be officially brought in on grounds of national security, but the European Union says U.S. military requirements represent no more than 3 percent of U.S. production and that the measures are really a form of protectionism for U.S. manufacturers.

EU exports of steel to the United States in 2017 were worth 5.3 billion euros ($6.53 billion) and of aluminum 1.1 billion euros.

For certain grades of steel, the United States cannot show there was any increase of imports last year, the EU sources say, meaning it would not be allowed to apply safeguard measures to them. For the EU, exports of those grades amounted to 2.8 billion euros ($3.5 billion).

Assuming U.S. tariffs fully covered EU steel, the European Union would put forward 25 percent tariffs on 2.8 billion euros worth of goods from the United States.

About a third would be steel grades, another third other industrial products and a final third agricultural products.

The list of products is set to be presented next week to EU countries, whose approval would be needed.

The“rebalancing” would have to take place within three months.

Reporting by Philip Blenkinsop; editing by Robert-Jan Bartunek

NAFTA

THE GLOBE AND MAIL. MARCH 2, 2018. OPINION. Trump doesn’t need to rip up NAFTA – he’s already winning
MEREDITH LILLY, is associate professor and Simon Reisman chair in International Affairs at Carleton University.

The seventh round of NAFTA negotiations is under way in Mexico, only this time to much less fanfare. That's a good thing, because it's time for a clear-headed rethink of where the negotiations are going and how this fits into Donald Trump's plans. It's tempting for us "smooth operators" in Canada to fixate on the U.S. President's next move, always full of drama, excitement and suspense. But this is a mistake. Negotiators who focus on transactional negotiating positions lose. Instead, we need to focus on Mr. Trump's long-term interests.

This is why the constant, panicked media speculation regarding whether Mr. Trump will tear up the NAFTA has been both misplaced and unhelpful. Misplaced because it is not in Mr. Trump's long-term interest to withdraw from NAFTA: Over all, the United States benefits from the agreement and Mr. Trump has come to understand this. With the help of Team Canada fanning out across the United States to promote our bilateral ties, American business and Republican congressional leaders appear to have convinced the President that a withdrawal would reduce investment in the United States and kill jobs. So Mr. Trump adapted his story and stopped talking about tearing up the deal in January.

If only Canada could do the same. Instead, Canadian media mostly continue to speculate on a potential withdrawal. This is deeply unhelpful because keeping that fire burning on the front pages only fuels uncertainty about Canada's economic climate. As Bank of Canada Governor Stephen Poloz has pointed out, business uncertainty is high in Canada and investment is in the deep freeze as everyone paces around awaiting the outcome of NAFTA talks. This serves to make the United States the safer bet for investment relative to Canada as investors seek stability and predictability.

All along, Mr. Trump has wanted to renegotiate NAFTA in order to spur investment in the United Staets and bring back American jobs. In this respect, the NAFTA talks themselves represent a negotiating position for this President – not an end goal. Unlike every other leader who has ever set out to strike a trade deal, this President doesn't necessarily want one. For him, success will be achieved if he reshores investment in the United States and creates jobs. Although he originally favoured a rapid negotiation that would potentially end in NAFTA's demise, dragging out a long negotiation may now serve his interests better.

Of course, NAFTA alone won't get him the success he seeks. At home, the President has rolled out the most comprehensive U.S. corporate-tax package in a generation. These reforms have dramatically changed the game for Canada by eliminating the corporate-tax advantage that helped make Canada a more attractive place to invest and do business. Yet, in this week's budget, Finance Minister Bill Morneau stubbornly refused to take any steps that could address the competitiveness challenge Canada faces as a result. Staying the course on Canadian fiscal plans that were developed before Mr. Trump became President is beyond foolhardy: It's reckless. Our economy is one-tenth the size of the United States and we depend on it for 75 per cent of our exports. It is imperative that we monitor U.S. changes that threaten our competitiveness and adjust our own sovereign, domestic economic policies accordingly.

More problematic have been Mr. Trump's moves to pursue trade actions and remedies to rig the game in his favour. So far, Canada has been his No. 1 target. Last year, it was softwood lumber and Bombardier. Now, it is the threat of 25-per-cent tariffs on U.S. steel imports that the President has said he is imposing on "national security" grounds. Canada may not be exempt this time. We are the top exporter of steel to the United States. Should tariffs be imposed, the negative consequences to our economy will be swift. Even if Mr. Trump doesn't follow through, the threat alone continues to destabilize the Canadian economy to his advantage.

Canada does not pose a national-security threat to the United States, and of course any move to impose tariffs on these grounds would be outrageous and unfair. A less-polite Canadian might even accuse the U.S. administration of cheating on the rules. But our blind adherence to the safety of a rules-based order increasingly reveals our powerlessness in the face of a rule breaker such as Mr. Trump. Each time this happens, Mr. Trudeau and his team seem wholly unprepared to respond. By the time Foreign Minister Chrystia Freeland asks the referee at the WTO to intervene, Mr. Trump will have declared victory and the game will be over.

It's time for a new playbook – one that demonstrates we've learned from Mr. Trump's transactional moves and allows us to achieve our own long-term interests of creating jobs and investment in Canada. Lest I be misunderstood, I'm not calling for Canada to escalate a trade war with Mr. Trump: we can't win. Instead, Mr. Trudeau and Mr. Morneau should focus on urgent, temporary measures to assist Canadian businesses in weathering this storm until calmer winds prevail. The Trudeau government is fond of telling us they are hoping for the best but preparing for the worst on NAFTA. Well, the worst may not be a NAFTA withdrawal at all. Instead, we may already be deep in it: a long, drawn out negotiation that destabilizes our economy and allows Donald Trump to win at what he set out to do all along.

REUTERS. MARCH 2, 2018. NAFTA talks soured, hamstrung by Trump steel trade war threats
Dave Graham, David Ljunggren

MEXICO CITY (Reuters) - U.S. President Donald Trump’s threats to unleash a trade war over steel crushed any hopes of substantial progress in talks to rework NAFTA, pitching negotiators into a political maelstrom and heightening fears for the trade deal’s future.

Trump said on Thursday that a plan for protectionist tariffs of 25 percent on steel imports and 10 percent on aluminum products would be announced next week, following up on Twitter on Friday by calling trade wars“good, and easy to win.”

That has cast a pall over the latest talks to renegotiate the North American Free Trade Agreement, which had already been disrupted by the early departure of a key U.S. official handling one of the most divisive subjects, content rules for autos.

Jerry Dias, head of Canadian private-sector union Unifor, said after meeting with Canada’s chief negotiator, Steve Verheul, early on Friday that Trump’s latest gambit to push his“America First” strategy had immediately soured the negotiations.

“The Canadian team is absolutely furious,” Dias told Reuters, adding that the steel announcement had killed off any hopes of advancing on the major sticking points at the talks, including setting new rules for auto content in the region.

“It is crystal clear to us that if Canada is not exempted from the U.S. tariffs on Tuesday, then Canada should walk away from the NAFTA table,” Dias noted earlier, likening the Trump administration to a“schoolyard bully.”

“Ultimately Canada’s going to have to start fighting fire with fire,” he told reporters.

Verheul said late on Thursday that his team was“keeping an eye on what’s going on outside”, noting that it was a“bit of a distraction”, without referring directly to steel.

One Mexican official familiar with the process gave a terse appraisal of how Trump’s announcement went down at the talks.

“Very bad news, very bad timing, very dangerous to go down this road,” the official said.

It remains unclear whether the tariffs would apply to the United States’ partners under NAFTA, which together account for more than 1 trillion dollars worth of annual trilateral trade.

Canada, the biggest foreign supplier of steel and aluminum to the United States, quickly pledged to retaliate if necessary.

Mexican officials said the government would likely wait for clarity on the matter before responding, but one said earlier this week that Mexico would hit back if subject to U.S. tariffs.

POLITICAL WILL

Expectations of progress at the seventh round in Mexico City had already been tempered by the conviction that major bones of contention were unlikely to be removed without the mediation of senior political figures involved in the sluggish process.

However, the risk of a tariff war between the NAFTA partners threw up a fresh roadblock to hopes for an agreement.

Mexican steel industry association Canacero said it expected the government to take“immediate reciprocal actions” if the United States slapped the tariffs on Mexico, and agricultural lobbyists at the NAFTA talks also condemned the tariff plan.

“These tariffs are very likely to accelerate a tit-for-tat approach on trade, putting U.S. agricultural exports in the crosshairs,” said Brian Kuehl, executive director of Farmers for Free Trade, a group defending NAFTA at the talks.

Trump has repeatedly threatened to pull out of NAFTA if the deal is not recast to his liking, arguing that it has caused an exodus of U.S. manufacturing jobs to lower-cost Mexico.

Negotiators from the three countries have been meeting for six months and made few concrete announcements of progress, with major disagreements over auto content, dispute resolution mechanisms and agricultural access hanging over the talks.

Officials have spent months mooting the prospect of negotiators being able to close several chapters in recent NAFTA rounds, only for the outcome to fall short.

Blindsided by Trump’s steel announcement, participants at the talks are looking ahead to Monday’s scheduled meeting between U.S. Trade Representative Robert Lighthizer, Canada’s Foreign Minister Chrystia Freeland and Mexico’s Economy Minister Ildefonso Guajardo for clarity on the path forward.

“It’s not a question of what’s achievable. Of course it’s achievable,” said one industry executive in Mexico close to the negotiations.“It’s a question of political will.”

Additional reporting by Lesley Wroughton, David Alire Garcia, Frank Jack Daniel and Sharay Angulo; Editing by Jonathan Oatis

CPTPP

Global Affairs Canada. February 23, 2018. Comprehensive and Progressive Agreement for Trans-Pacific Partnership signing ceremony in Chile

The official signing ceremony for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will be held in Santiago, Chile, on March 8, 2018.

GDP

StatCan. 2018-03-02. Gross domestic product, income and expenditure, fourth quarter 2017

• Real GDP by expenditure, Fourth quarter 2017: 1.7% increase (quarterly change, annualized)
• Source(s): CANSIM table 380-0064: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3800064&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• National saving rate: 4.5%, Fourth quarter 2017
• Source(s): CANSIM table 380-0071: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3800071&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• Household disposable income, Fourth quarter 2017: 1.3% increase (quarterly change)
• Source(s): CANSIM table 380-0072: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3800072&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• Terms of trade: 95.5 (2007=100), Fourth quarter 2017
• Source(s): CANSIM table 380-0065: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3800065&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• Debt service ratio: 13.83, Fourth quarter 2017
• Source(s): CANSIM table 380-0073: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3800073&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=

Real gross domestic product (GDP) grew 0.4% in the fourth quarter, the same rate as the previous quarter. Final domestic demand rose 1.0%.

Business investment increased 2.3%. Investment in residential structures rose 3.2% on the strength of both resale activity and new construction. Businesses also increased outlays for the fourth consecutive quarter on machinery and equipment (+3.0%) and non-residential structures (+1.3%).

Chart 1: Gross domestic product and final domestic demand

Businesses accumulated $14.2 billion of inventories in the fourth quarter, as manufacturers, retailers and wholesalers all added to their stocks.

Real household final consumption expenditure slowed to 0.5% growth, following a 0.9% increase in the previous quarter. Spending was up on durable (+0.4%), semi-durable (+0.3%) and non-durable (+0.4%) goods, as well as on services (+0.6%).

Export volumes increased 0.7% following a 2.7% decline in the third quarter, while real imports were 1.5% higher. Improved terms of trade boosted economy-wide purchasing power, and real gross national income increased 1.0%. Export prices rose 3.6% in the fourth quarter on the strength of energy products, compared with a 1.5% increase in import prices.

Expressed at an annualized rate, real GDP rose 1.7% in the fourth quarter. In comparison, real GDP in the United States grew 2.5%.

Chart 2: Contributions to percent change in real gross domestic product, fourth quarter

Housing investment accelerates

Business gross fixed capital formation grew 2.3% in the fourth quarter, compared with 0.8% in the previous quarter. Higher investment in residential structures was the main contributor, increasing 3.2% following a flat third quarter. Ownership transfer costs rose 9.3%, indicating increased resale activity. New mortgage stress test measures were anticipated for 2018. New housing construction (+3.0%) also rose, while renovations edged down 0.1%.

Outlays on non-residential structures increased 1.3% on higher investment in engineering structures (+2.1%), while investment in non-residential buildings declined 0.8%.

Business investment in machinery and equipment rose 3.0%, primarily because of increased outlays on aircraft and other transportation equipment.

Investment in intellectual property products was unchanged overall. Increased outlays on research and development (+2.1%) and software (+1.1%) were offset by declines in mineral exploration and evaluation (-11.0%).

Inventories continue to accumulate

Businesses added $14.2 billion to inventories in the fourth quarter, following additions of $17.0 billion in the third quarter.

Non-farm inventories accounted for most of the accumulation, adding $13.1 billion to stocks. Retailers added $4.8 billion to stocks, of which $2.4 billion consisted of motor vehicles. Wholesalers added $4.1 billion to inventories.

Farm inventories rose by $1.1 billion, compared with a $498 million increase in the third quarter.

The economy-wide stock-to-sales ratio increased from 0.761 in the third quarter to 0.763 in the fourth quarter.

Household spending decelerates

Household final consumption expenditure grew 0.5%, following a 0.9% gain in the previous quarter. Increases were recorded in services (+0.6%) and in durable (+0.4%), semi-durable (+0.3%) and non-durable (+0.4%) goods.

Expenditures on insurance and financial services (+1.5%), recreation and culture (+0.9%) and food (+0.7%) increased, while purchases of vehicles were flat.

Export volumes increase

Real exports rose 0.7% following a 2.7% decline in the third quarter.

Exports of goods rose 0.6%, following a 3.4% drop in the previous quarter. The gain was led by basic and industrial chemical, plastic and rubber products (+7.9%). Forestry products and building and packing materials (+3.5%) also contributed to the gain, as did motor vehicles and parts (+1.3%).

Exports of services (+1.3%) increased for the eighth consecutive quarter, mainly travel services (+4.4%).

Real imports were 1.5% higher in the fourth quarter, after edging up 0.1% in the previous quarter.

Imports of goods increased 1.8%, with notable gains in aircraft and other transportation equipment and parts (+24.6%) and electronic and electrical equipment and parts (+6.2%).

Imports of services increased 0.4% following 1.3% growth in the third quarter. Most of the gain was in commercial services (+1.6%), while imports of travel services declined 1.6% following 4.3% growth in the third quarter.

Following a 3.9% decline in the third quarter, export prices rebounded 3.6%, notably energy products. Import prices (+1.5%) advanced more slowly and the terms of trade improved.

Growth in economy-wide income accelerates as terms of trade improve

Real gross national income (the real purchasing power of income from Canadian-owned factors of production) grew 1.0% in the fourth quarter, outpacing real GDP growth and reflecting the improved terms of trade. The GDP implicit price index, which is the overall price of goods and services produced in Canada, increased 1.2% in the fourth quarter.

Nominal earnings of non-financial corporations (gross operating surplus) rose 2.7%, following a 1.0% decline in the third quarter, while the earnings of financial corporations declined 1.2%.

Chart 3: Real gross domestic product (GDP) and real gross national income (GNI)

Household disposable income increases

Household disposable income rose 1.3%, following a 1.4% gain in the third quarter. The growth was mainly due to increased compensation of employees (+1.5%), on higher wages and salaries in most industries, particularly in services-producing industries.

The household saving rate rose from 4.0% in the third quarter to 4.2% in the fourth quarter as household disposable income outpaced household final consumption expenditure. Because of rising interest payments (+3.0%), primarily due to increased mortgage costs, the debt service ratio of households edged up to 13.83%.

Annual GDP growth accelerates in 2017

Real GDP rose 3.0% in 2017, following 1.4% growth in 2016. Much of this growth was attributable to the first two quarters of 2017, with deceleration observed toward the end of the year. Final domestic demand advanced 3.0% with steady growth throughout the year.

Household final consumption expenditure rose 3.5%, with increased outlays on goods (+3.9%) and services (+3.2%). Increased expenditures on insurance and financial services (+5.0%) and purchases of vehicles (+6.3%) were strong contributors to growth.

Business gross fixed capital formation rose 2.6%, following a 4.5% decline in 2016. Investment in machinery and equipment (+6.0%) and residential structures (+3.1%) both increased sharply. Investment in non-residential structures rose 0.3%, following two annual declines.

Also contributing to growth was business investment in inventories, up by $13.9 billion, of which $13.6 billion was in non-farm inventories. Manufacturers, wholesalers, and retailers all added to their stocks in each quarter.

Exports grew 1.0% for the second consecutive year, with gains in both goods (+0.6%) and services (+2.8%). Imports increased 3.6% after falling 1.0% in 2016.

Compensation of employees rose 3.9% (nominal terms), contributing to a 4.8% gain in household disposable income. This was slightly faster than the growth in household final consumption expenditure (+4.6%), and the household saving rate consequently edged up to 3.6%.

The gross operating surplus of corporations increased 9.5% as earnings of both non-financial and financial corporations rose sharply.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180302/dq180302a-eng.pdf

StatCan. 2018-03-02. Gross domestic product by industry, December 2017

• Real GDP by industry, December 2017: 0.1% increase (monthly change)
• Source(s): CANSIM table 379-0031: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3790031&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=

Real gross domestic product (GDP) edged up 0.1% in December as 13 of 20 industrial sectors increased. This followed a 0.4% gain in November.

Chart 1   Chart 1: Real gross domestic product edges up in December

The output of service-producing industries edged up 0.1% in December, as increases in real estate and rental and leasing, the public sector and finance and insurance more than offset declines in wholesale and retail trade. The output of service-producing industries rose every month in 2017.

Goods-producing industries edged down 0.1% in December, following 1.0% growth in November. Declines in the manufacturing and construction sectors more than offset higher output from mining, quarrying, and oil and gas extraction.

Real estate and rental and leasing leads growth

Real estate and rental and leasing rose 0.5% in December, its highest monthly growth since March 2017.

The output of offices of real estate agents and brokers was up 5.9% in December, its largest monthly increase since June 2009. Home resale activity was up in most major Canadian markets. This came on the eve of the implementation of new mortgage rules, including stress-testing for uninsured mortgages, in January 2018.

The increased activity in real estate contributed to the 0.3% rise in professional services, as legal, accounting and related services increased 1.3%.

Mining, quarrying, and oil and gas extraction increases

Mining, quarrying, and oil and gas extraction increased 0.6% in December, rising for a second consecutive month after declining four of the previous five months.

Chart 2: Mining, quarrying, and oil and gas extraction increases in December

The oil and gas extraction subsector was up 1.4%, led by a 4.6% gain in non-conventional oil extraction. A ramp-up in production continued in the industry following maintenance turnaround and capacity expansion at some facilities in the second half of 2017. Conventional oil and gas extraction was down 1.3%.

Mining excluding oil and gas extraction was down 1.8%, a third consecutive monthly decline after rising the six previous months. Metal ore mining was down 3.2% as every industry group declined except other metal ore mining (+1.6%). Non-metallic mineral mining contracted 0.9%, largely due to a 2.6% drop in potash mining. Coal mining grew 6.1% in December after three months of decline.

Support activities for mining and oil and gas extraction fell 1.8%. This was an eighth consecutive decline for the subsector after a string of increases that began in the spring of 2016 and ended in April 2017.

Finance and insurance continues to grow

The finance and insurance sector rose 0.5% in December. Financial investment services, funds and other financial vehicles were up 2.3% as financial market activity increased. Depository credit intermediation and monetary authorities edged up 0.2%, while insurance carriers and related activities grew 0.3%

Public sector up as Ontario community college strike ends

The public sector grew 0.2% in December as educational services rose 0.6%. Community colleges and CEGEPs grew 5.2% following a return to classes for Ontario community college students. A five-week strike by faculty staff ended on November 19, 2017, with the government of Ontario passing back-to-work legislation.

Health care and social assistance was up 0.3% while public administration edged down 0.1%.

Manufacturing declines, following strong November

The manufacturing sector contracted 0.7% in December, giving back part of November's gains which reflected in part restored production capacity. Both non-durable and durable manufacturing declined.

Non-durable manufacturing contracted 0.9% as six of nine subsectors were down. The chemical manufacturing subsector declined 2.2% on lower output by manufacturers of pharmaceuticals and medicine and pesticide, fertilizer and other agricultural chemicals.

Food manufacturing (-1.3%) and printing and related support activities (-5.5%) were down while plastic and rubber products (+1.5%) and paper manufacturing (+1.8%) increased.

Durable manufacturing contracted 0.5% in December as 6 of 10 subsectors decreased. Transportation equipment declined 1.4%, as most industry groups decreased. Machinery (-1.6%) and primary metal (-1.6%) manufacturing was down, while there were gains in miscellaneous (+8.8%) and computer and electronic product (+4.0%) manufacturing.

Retail and wholesale trade decline

Retail trade contracted 0.9% in December as 8 of 12 subsectors declined. Retail activity at stores typically associated with holiday shopping was down, led by general merchandise (-4.9%), clothing and clothing accessories (-3.6%) and electronic and appliance (-3.2%) stores. These store types reported higher sales in November partly as a result of promotional events such as Black Friday combined with new product releases. There were also gains in December by food and beverage stores (+1.9%) and motor vehicle and parts dealers (+1.7%) on account of higher activities at new car dealers.

The wholesale trade sector (-0.7%) was down for the third time in 12 months in December, as six of nine subsectors contracted. Personal and household goods wholesaling (-3.1%) contributed the most to the decline. Miscellaneous wholesalers (-2.4%) registered their third decline in four months. Motor vehicle and parts wholesaling was down 2.5%, the largest decline in more than a year. Building materials and supplies (+3.0%) and machinery, equipment and supplies (+0.8%) wholesaling increased.

Construction down for the second time in 12 months

After six consecutive months of growth, the construction sector contracted 0.3% in December. Residential construction was down 0.7% as declines in double-type dwelling units and alterations and improvements more than offset growth in single, row and apartment-type dwelling units. Repair construction declined 1.0%, down for the second time in three months, while engineering and other construction activities was essentially unchanged.

For the seventh month in a row, non-residential construction was up as industrial, public and commercial construction all grew.

Other industries

Transportation and warehousing grew 0.2% as five of nine subsectors increased. Rail transportation was up 2.4% as movement of coal, grain and fertilizer, forest products and intermodal freight by rail increased. Pipeline transportation grew 0.6% as crude oil and other pipeline transportation was up 3.3%, regaining part of the decline in November that was influenced by a pipeline leak in the United States. Pipeline transportation of natural gas was down 2.1%. Truck transportation (-0.7%) declined for the second time in three months.

Utilities were up 0.6% in December. Electric power generation, transmission and distribution was up 0.5%, while natural gas distribution rose 2.0% on higher demand across all classes of customers. Temperatures in December were lower than usual east of Manitoba and warmer in the rest of the country.

Accommodation and food services were unchanged in December, as a slight decline in accommodation services (-0.2%) was offset by food services and drinking places edging up 0.1%.

Chart 3: Main industrial sectors' contribution to the percent change in gross domestic product in December

Fourth quarter of 2017

The value added of goods-producing industries increased 0.5% in the fourth quarter, marking six consecutive quarters of growth, while service-producing industries rose 0.5%. Growth in both goods-producing and service-producing industries were extensive as almost all sectors recorded gains.

The main contributor to growth in the goods-producing industries was the construction sector (+1.5%), which rose for the fifth consecutive quarter. All components of the sector grew, led by engineering construction (+1.9%).

Manufacturing was up 0.5% as durable manufacturing rose 1.1% while non-durable manufacturing declined 0.3%. The rise in durable manufacturing was widespread across most subsectors, while the decline in non-durable manufacturing was influenced by a 3.8% decrease in the chemical subsector. Mining, quarrying, and oil and gas extraction was unchanged as the increase in conventional oil and gas extraction (+2.1%) was offset by declines in mining except oil and gas extraction (-2.2%) and support activities for mining and oil and gas extraction (-6.4%). Utilities (-0.3%) and agriculture, forestry, fishing and hunting (-1.0%) declined.

In service-producing industries, real estate and rental and leasing rose 0.7% as activity by real estate agents and brokers was up 7.7%. Wholesale trade (+1.0%) rose for a fifth consecutive quarter, led by machinery, equipment, and supplies wholesaler-distributors (+2.4%). Retail trade rose 1.0% on higher activity at motor vehicle and parts dealers, building materials and garden equipment and supplies stores and electronics and appliance stores.

Professional, scientific and technical services (+0.8%), finance and insurance (+0.2%) and transport and warehousing (+0.4%) all increased in the fourth quarter. The public sector (education, health and public administration) grew 0.4%.

Annual 2017

Growth was widespread in 2017, with 18 of 20 industrial sectors increasing. Goods-producing industries rose 4.6% in 2017, more than offsetting the declines in 2015 (-1.7%) and 2016 (-0.5%). The value added of service-producing industries rose 2.8%, the highest growth rate since 2011.

The largest contributor to the increase in goods-producing industries was the mining, quarrying, and oil and gas extraction sector, which rose 7.8%. Oil and gas extraction grew 6.3% while mining (except oil and gas) rose 2.9%. Support activities for mining, oil and gas extraction rose 37%, following declines of 34% in 2015 and 24% in 2016. Manufacturing was up 3.3%, as gains in non-durable manufacturing (+3.5%) outpaced those in durable manufacturing (+3.2%). Construction rose 3.9%, following declines of 4.6% in 2015 and 3.3% in 2016. Utilities rose 4.1%.

The value added of service-producing industries rose 2.8% in 2017, led by a 7.5% increase in the wholesale trade sector, with all subsectors recording increases above 3%. Real estate and rental and leasing was up 2.8%, Retail trade (+4.9%) posted its highest gains since 2013, in part from record sales for motor vehicles. Transportation and warehousing rose 4.8%, in part from higher growth in rail and truck transportation than in recent years. Growth in the finance and insurance sector (+2.7%) was the lowest since 2012. The public sector rose 1.7% with increases above 1% in all three components (educational services, health care and social assistance and public administration).

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180302/dq180302b-eng.pdf

THE GLOBE AND MAIL. MARCH 2, 2018. Economy grows 1.7% in fourth quarter: Canada downshifts just as trade war threats rise
MICHAEL BABAD

CANADA ON SLOW TRACK

Canada's economy expanded in the fourth quarter of 2017 at an annual pace of just 1.7 per cent, marking the second three-month period of slowing growth in what is expected to be a weaker year.

The economy virtually flatlined in December alone, with a gain of 0.1 per cent, Statistics Canada said Friday.

At the same time, third-quarter growth was revised down to 1.5 per cent.

The third and fourth quarters of last year have now come in at a much slower pace than in the previous several quarters, leading analysts to forecast weaker growth this year.

This comes amid heightened uncertainty, as well, particularly on the trade front. Not only are negotiations now under way to remake the North American free-trade agreement, but U.S. President Donald Trump pledged on Thursday to levy tariffs on imported steel and aluminum, as well, a move that would hit Canada hard.

Final domestic demand, at 3.9 per cent, matched that of the third quarter. The pace of consumer spending slowed to 2.1 per cent from 3.7 per cent in the earlier period, the rate of residential investment shot up 13.4 per cent, and that of business investment 8.2 per cent, annualized.

Exports were also up, though eclipsed by much stronger imports.

Canada's economic prospects are iffy at best today, with growth slowing and the threat of a brutal trade war.

And then there's the weak loonie, though that could at least be good news for the country's exporters.

Here's where things stand:

The economy

Canada enjoyed a spell of hefty, and unsustainable, spell of heady expansion that came to an abrupt halt in the third quarter of last year with annualized growth in gross domestic product of just 1.5 per cent.

"The 1.7 per cent (annualized gain in Q4 GDP and the revised 1.5-per-cent gain in Q3 are down significantly from the unexpectedly strong average increase of 37 per cent from mid-2016 to mid-2017," said Royal Bank of Canada assistant chief economist Paul Ferley.

"This earlier strength resulted from a cessation of sizeable declines in energy investment along with consumers continuing to respond to historically low interest rates," he added.

"The resulting strong pace of activity had the impact of moving the economy to capacity by mid-2017. Thus the slowdown in growth over the second half of last year is not unwanted and will help insure the economy does not move too far into excess demand and stoke inflation pressures. In fact, the intent of policy going forward will be to sustain growth close to the economy's potential rate, which is assumed to be around 1.6 per cent."

National Bank of Canada senior economist Krishen Rangasamy also noted that the "white hot pace" of the first six months was "never sustainable," so no one should be surprised by Friday's reading.

"While it will be difficult for consumers to replicate last year's performance, they should nonetheless find support from higher wages (courtesy of a tight labour market) and an enhanced Canada Child Benefit," Mr. Rangasamy said.

"The recovery of business investment spending is likely to continue in 2018 amidst an improving outlook for corporate profits and better intentions expressed by firms in Statistics Canada's latest report on planned capital expenditures," he added.

"Increased spending by the federal government as well as Ontario and Quebec ahead of elections in those provinces (made possible by the large increase in nominal GDP and hence revenues in 2017), will also be supportive of domestic demand. The outlook for exporters remains unclear considering the apparent tilt towards protectionism in the U.S., although deals such as CETA and CPTPP warrant some optimism about export growth to non-U.S. trade partners."

The loonie and interest rates

The Canadian dollar has tumbled from about 81.5 US cents in early February to below 78 US cents today, hit by a stronger greenback amid market turmoil and redrawn expectations of what the Bank of Canada will do.

The central bank has already raised its benchmark overnight rate this year, and was expected to do so up to three more times in 2018.

But there's a lot of uncertainty surrounding that, heightened by negotiations to remake the North American free-trade agreement, and now President Donald Trump's pledge to hit steel and aluminum imports with tariffs.

As The Globe and Mail's Steven Chase, Greg Keenan and Adrian Morrow report, Mr. Trump said yesterday he plans to bring in 25-per-cent tariffs on steel imports, and a 10-per-cent levy on aluminum.

The U.S. dollar has actually dipped, though the loonie remains under pressure, trading between about 77.5 and 78 US cents so far.

"Many of the U.S.'s main trading partners have said they will respond with reciprocal action," said Adam Cole, Royal Bank of Canada's chief currency strategist in London.

"Generally, restrictions on world trade would be less negative for relatively closed economies, like the U.S., and hence positive for the USD," he added, referring to the U.S. dollar by its symbol.

"But the risk of a bilateral trade war with China makes the current situation different, given China's large holdings of [U.S. treasuries]."

Canada is a big exporter, and Ottawa doesn't know at this point whether it would be exempt from the U.S. trade action. But any move to include Canada would rippled through the economy, well beyond just the exporters affected.

"The direct impact of these tariffs would be inflation for the U.S. and, by opening up some economic slack, deflationary for Canada," Royce Mendes and Avery Shenfeld of CIBC World Markets said in a report on Thursday's announcement by Mr. Trump.

"If these plans move forward with Canada explicity included, expect some further depreciation of the Canadian dollar, which would add back some inflation pressure," they added.

"But given the negative impacts on economic growth, the Bank of Canada is likely to tolerate the inflation coming from [Canadian dollar] weakness, so overall, a tariff war leans towards a more patient central bank in terms of additional rate hikes."

The central bank, which is expected to make no changes when it meets again next week, has already flagged NAFTA as a concern.

REUTERS. MARCH 2, 2018. Canada's economy grows modestly in fourth quarter on back of housing gains
Leah Schnurr

OTTAWA (Reuters) - Canada’s economy grew modestly in the fourth quarter and well below the strong pace set in the first half of the year, boosted by housing gains ahead of tighter mortgage regulations but hurt by a smaller accumulation of inventories.

The report from Statistics Canada on Friday was expected to keep the Bank of Canada in a holding pattern on interest rates at its policy meeting next week, though the central bank is still on track to raise borrowing costs later this year.

Canada’s gross domestic product grew by an annualized 1.7 percent in the final quarter of 2017, short of economists’ forecasts for 2.0 percent growth. The Canadian dollar touched a 10-week low against the greenback following the report before paring losses.

The economy grew 3 percent for the year, its best performance since 2011, thanks to annualized growth of 4 percent or better in the first two quarters. Analysts said the economy was likely returning to a more sustainable pace.

“The rush of growth we had from the middle of 2016 to the middle of 2017 is now well and truly over,” said Doug Porter, chief economist at BMO Capital Markets.

“The economy is settling back into a growth path closer to potential, or likely just around 2 percent or so.”

Business capital formation grew by an annualized 9.5 percent in the fourth quarter, largely due to investment in residential structures as both resale activity and new housing construction rose.

Some home buyers rushed to make purchases toward the end of last year ahead of new rules that came into effect in 2018 that included“stress tests” to ensure consumers are able to handle higher interest rates.

Businesses also invested more in machinery and equipment, particularly aircraft and other transportation equipment, while household spending also helped support the economy. Still, companies added less to their inventories than in the previous quarter, weighing on growth.

Although fourth-quarter growth fell below the Bank of Canada’s forecast of 2.5 percent, economists said they still expected policymakers to raise rates again in the coming months.

“They are going to make sure this more moderate growth rate is maintained, so eventually I think you will see further tightening by the Bank of Canada,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

The central bank has raised rates three times since last July. Markets see a 72 percent likelihood of an increase in May, while a hike in July is fully priced in.

Additional reporting by Susan Taylor and Fergal Smith in Toronto; Editing by Bernadette Baum and Paul Simao

BUDGET

Department of Finance Canada. March 2, 2018. Minister Morneau Brings Budget 2018 Call to Action on Gender Equality in Montreal

Montreal, Quebec – The Government of Canada is building on its successful long-term plan that focuses on people and the things that matter most to them, leading to a stronger economy and more opportunities for the middle class. With a strong and growing economy in place, now is the right time to ensure that all Canadians can contribute to, and share in, Canada’s prosperity. This means breaking down barriers to gender equality, so that women and girls can participate in, and contribute to, Canada’s success.

Today, Finance Minister Bill Morneau spoke at an event hosted by the Montreal Council on Foreign Relations in Montreal to highlight how Budget 2018 advances the Government’s plan for middle class progress with new investments to promote gender equality and create new opportunities for Canadians.

Encouraging the full participation of Canadians in the economy also means investing in people so they can succeed. To this end, Budget 2018 introduces the Canada Workers Benefit, to encourage more people to join the workforce and put more money in the pockets of low-income workers. Building on the former Working Income Tax Benefit, the new Canada Workers Benefit will offer real help to more than two million Canadians who are working hard to join the middle class, raising more than 70,000 Canadians out of poverty.

Through Budget 2018, the federal Government is leading by example in promoting gender equality by proposing:

• Proactive pay equity legislation and pay transparency in federally regulated sectors.
• A new Gender Equality Results Framework to support equal opportunity for all Canadians, backed by new investments to achieve equality in the workforce and at home;
• A new Women Entrepreneurship Strategy to encourage greater participation by women in the economy, and help more women-owned companies grow into world class businesses.
• To support the advancement of women in senior positions by publicly recognizing corporations that are committed to promoting women to senior management and board positions.

Quote

“Providing all Canadians with the opportunity to realize their full potential is not only the right thing to do, it’s the smart thing to do. Our future prosperity depends on every Canadian having the opportunity to contribute to and benefit from a growing economy. We are stronger together. Equality means more prosperity. But the Government can’t achieve gender parity on its own. Business leaders must also do their part. It is the time to empower women and encourage their participation in the economy. It is key to spur economic growth, increase profits, bring greater diversity and more innovation.”

- Bill Morneau, Minister of Finance

Quick Facts

Budget 2018 supports Montreal and the province of Quebec by proposing:

• $616 million over five years for the ongoing maintenance and rehabilitation of the federally-owned bridges and other transportation infrastructure in the Montreal area
• $99 million over five years to the Canada Economic Development Agency for Quebec Regions to support the federal Innovation and Skills Plan. Of that sum, $22 million will support women entrepreneurs
• $400 million over 10 years to support an Inuit-led housing plan in the Inuit regions of Nunavik, Nunatsiavut, and Inuvialuit
• $8.0 million over 3 years to support the continued in-depth assessment of VIA Rail’s high-frequency rail proposal for the Toronto-Quebec City corridor.
• $11.3 million for the renewal of the Remote Passenger Rail Program, which supports passenger rail services between Sept-Îles and Schefferville.

Major transfers to Quebec will total $23.7 billion in 2018-19, an increase of $1 billion from the previous year:

• $11.7 billion through Equalization, an increase of $651.5 million from the previous year;
• $8.8 billion through the Canada Health Transfer, an increase of $295.3 million from the previous year; and
• $3.2 billion through the Canada Social Transfer, an increase of $82.4 million from the previous year.

FULL DOCUMENT: https://www.fin.gc.ca/n18/18-011-eng.asp

Department of Finance Canada. March 1, 2018. Minister Morneau Brings Budget 2018 Call to Action on Gender Equality to Toronto

Toronto, Ontario – The Government of Canada is building on its successful long-term plan that focuses on people and the things that matter most to them, leading to a stronger economy and more opportunities for the middle class and those working hard to join it. With a strong and growing economy in place, now is the right time to make progress that truly reflects the diversity of our country, where all Canadians can contribute to, and share in, Canada's prosperity.

Canada's strong fiscal fundamentals—anchored by a low and consistently declining debt-to-GDP (gross domestic product) ratio—mean that the Government has the confidence to make the investments that will strengthen and grow the middle class, and lay a more solid foundation for our children's future.

Finance Minister Bill Morneau today spoke to the Canadian Club in Toronto at a Facebook Live event on how Budget 2018 advances the Government's plan for middle class progress with new investments to promote gender equality and create new opportunities for Canadians.

Through Budget 2018, the federal government is leading by example in promoting gender equality by proposing:

• A legislated "equal-pay-for-equal-work" regime in federally regulated sectors to the benefit of approximately 1.2 million employees.  
• To provide Canadians with more information on the pay practices of employers in the federally regulated sector, helping to shine a light on employers who lead in equitable pay practices, while holding employers accountable for wage gaps. 
• To support the advancement of women in senior positions by publicly recognizing corporations that are committed to promoting women to senior management and board positions.
• A new Gender Results Framework to support equal opportunity for all Canadians, backed by new investments to achieve equality in the workforce and at home.
• A new Women Entrepreneurship Strategy to encourage greater participation by women in the economy, and help more women-owned companies grow into world-class businesses.

Quotes

"Providing Canadians with the opportunity to realize their full potential isn't just the right thing to do. It's the smart thing to do for our economy. Simply put, equality between Canadian women and men will lead to greater prosperity and a better quality of life—not just for women and their families, but for all Canadians. And with equality of opportunity as a guiding principle, Budget 2018 proposes a comprehensive range of measures to ensure every Canadian has an equal and fair chance at success."

- Bill Morneau, Minister of Finance

Quick facts

Budget 2018 supports Toronto by proposing:

• To increase the amount of loans provided by the Rental Construction Financing Initiative from $2.5 billion to $3.75 billion over the next three years. This new funding is intended to support projects that address the needs of modest- and middle-income households struggling in expensive housing markets like the Greater Toronto Area. In total, this measure alone is expected to spur the construction of more than 14,000 new rental units across Canada.
• Renewed funding of $1.2 million over three years, starting in 2019–20, in support of the Gairdner Foundation. Based in Toronto, the Gairdner Foundation recognizes and rewards scientific excellence through the Canada Gairdner Awards, which are among the most prestigious biomedical prizes worldwide. This new funding would support the Foundation's activities, including Canadian and international outreach efforts to expand its reach and diversity.

FULL DOCUMENT: https://www.canada.ca/en/department-finance/news/2018/03/minister-morneau-brings-budget-2018-call-to-action-on-gender-equality-to-toronto.html

ENERGY

REUTERS. MARCH 2, 2018. Brazil approves sale of wind energy firm to JV with Canada pension fund

RIO DE JANEIRO (Reuters) - Brazil’s antitrust watchdog Cade approved the sale of Ventos de Santo Estevao Holding, a wind energy firm, to a joint venture between Votorantim Energia and Canadian pension fund CPPIB, the federal register showed on Friday.

The wind firm is owned by the Mario Araripe Group. CPPIB currently invests in government bonds, private sector securities and real estate in Brazil.

To explain its approval, Cade noted that the purchasing companies had a small share of the relevant market in the most conservative scenario.

Reporting by Jose Roberto Gomes and Anthony Boadle

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LGCJ.: