Many say Canada trade skirmish is mostly bad for North Country

Last week, U.S. Commerce Secretary Wilbur Ross announced that tariffs of 25 percent on steel and 10 percent on aluminum from the European Union, Canada and Mexico would go into effect.

The backlash was swift.

Mexico and the EU announced retaliatory tariffs on everything from lamps to bourbon, and Canada announced $16.6 billion Canadian, or almost $13 billion in U.S. dollars, in tariffs on a range of items — including aluminum, steel, yogurt, toilet paper, sailboats and pens. It’s clear that this trade skirmish, especially with Canada, will impact the North Country — and most people agree, the effect will not be good.

The North Country, said Scott Gray, chairman of the Jefferson County board of Legislators, sees Canada differently from the rest of the country.

“They view Canada as a different country; we view Canada as our neighbor,” he said. “Vast populations go back and forth across the border.”

Many are worried this close relationship may be damaged by the tariffs, including U.S. Rep. Elise Stefanik, R-Willsboro.

“If President Trump wants to target Chinese steel dumping, he should target tariffs at China and not at our friends to the North,” she wrote in a statement released last week. “As a Northern Border district, I am concerned that these tariffs could incentivize Canadian firms in our district to leave, or possibly incentivize Canada to impose harmful tariffs on our own products. Thousands of manufacturing jobs in the North Country are directly tied to Canada and cross-border supply chains.”

The Trump administration has defended the tariffs as necessary to protect the national steel and aluminum industry for defense reasons, but the EU is going to bring a complaint in the World Trade Organization, which may rule against the United States.

“The mechanisms put in place to avoid setbacks are quite tight; and member countries have the right to retaliate on unjustified protective measures,” wrote Associate Professor of Economics Luciana Echazu, who serves as the associate dean of programs and operations at the Clarkson University Reh School of Business, in an email to the Times. “That is why I think that it will be quite improbable that the US succeeds in its demands.”

The concern over the business impact of these tariffs and retaliations is shared by elected officials and business people alike.

“It will probably affect our northern border communities more than it will impact Canada,” said David Zembiec, deputy CEO of Jefferson County Economic Development. Zembiec does not think tourism will be overly affected — that relies more on the value of the dollar — but manufacturing could be hurt.

Echazu said the benefit to some firms — like Alcoa — will be outweighed by the damage to the region overall. Tariffs reduce imports of certain goods, like aluminum, from Canada.

“It would mean that US companies (such as ALCOA) would benefit from these tariffs, as prices are now higher, and that may be good for our area,” wrote Echazu “But if we look a bit further, consumers are not going to be too happy about these higher prices. … Profitability of the entire supply chain suffers, and manufacturers end up producing fewer units; which in turn means, that eventually ALCOA will see a decrease in demand, and that is not going to be good for the North Country.”

In the end, she wrote, the impact on the area is negligible, and once the retaliatory Canadian tariffs on American goods are added, American producers will suffer.

“One thing is certain, this set of measures and counter measures can only depress the activities in the market,” Echazu wrote.

She pointed to the Smoot-Hawley tariff in the early 20th century, which helped fuel the Great Depression. But there is hope, too.

“Let us not be alarmist, though, for now we can look at this as a game of threats and counter threats,” she wrote. “We shall see what happens, but it is my belief that in the end, we should be able to find a peaceful solution. Canada has a long history as an ally of the United States, a trade war would not only strain the commercial ties, but also the diplomatic relations.”

The reaction to the tariffs in the North Country has been bipartisan, with elected officials from both parties opposing the proposal, including the Republican chairmen of Jefferson and St. Lawrence County legislators.

“I’m not in favor of the tariffs at all; I’m in favor of the free market,” said Kevin Acres, chairman of the St. Lawrence County Board of Legislators. “There is no winner in this trade war.”

Even in Massena, where union leaders for Alcoa’s aluminum plant have been enthusiastic about the tariffs, there is concern that the overall impact will be negative.

“Targeting Canada, that’s the last thing we should do,” said town Supervisor Steven O’Shaughnessy. “We rely on cross-border shopping.”

It is early yet, but so far travel across the border seems to remain steady.

“As far as the bridge is concerned, there hasn’t been any impact,” said Robert Horr, executive director of the Thousand Islands Bridge Authority. He said he could not speculate on any future impact.

Echazu said that the tariff impact might extend to shopping, even if it only directly relates to industry.

“Think about it this way: when tariffs are imposed, they increase the price of the traded good, what that means is that Canadians are going to be more reticent to buy our products,” she wrote. “If the measures are bilateral, then overall prices will increase, and consumption will decrease regardless of where the consumer is located.”

The trade skirmish, while dangerous for local economies, will likely not be the first step in a total reworking of the North American Free Trade Agreement, according to Echazu.

“I am quite certain that neither Canada nor Mexico would like for that to happen; and the consequences could potentially be disastrous for the US economy,” she wrote. “I believe, however, that what this is doing is creating a great deal of uncertainty in the economy; which is not good for economic activity and productivity. We, in the North Country, have been struggling with stagnant economic growth, and we need stability so that we can plan for sustainable growth.”