Softwood lumber: Well, that escalated quickly

Wells: On Monday, Fox News carried an interview with a Wisconsin dairy farmer who has hit hard times and blames Canada. The President was watching.

A machine places freshly cut trees into piles before transport to the West Fraser Timber Co. sawmill in Quesnel, British Columbia, Canada, on Thursday, July 11, 2013. West Fraser Timber Co., the largest lumber producer in North America, had a sustainable rise in price, demand volatility, and profits within the past year. (Ben Nelms/Bloomberg/Getty Images)

(Ben Nelms/Bloomberg/Getty Images)

Shots fired:

“It has been a bad week for U.S.-Canada trade relations [US trade secretary Wilbur Ross said in a statement this evening]. Last Monday, it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States. Today, in a different matter, the Department of Commerce determined a need to impose countervailing duties of roughly one billion dollars on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement.”

Chrystia Freeland and Jim Carr were quick to reply:

“The Government of Canada disagrees strongly with the U.S. Department of Commerce’s decision to impose an unfair and punitive duty. The accusations are baseless and unfounded…The Government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation.

It started with such promise, too. When Justin Trudeau visited the White House on Feb. 13, the longstanding softwood lumber dispute with the Americans came up — and in an interesting way. I was told some time ago by a source familiar with the discussions that at some point, Donald Trump became interested in knowing how his budding relationship with Trudeau compared to Barack Obama’s. Trudeau was circumspect. I did have a good working relationship with President Obama, the prime minister said, approximately. But you know one thing he was never in a position to deliver on? Softwood lumber.

Hint, dropped. And reinforced, in a followup call ten days later. The hint seems to have been taken: some Canadians who’ve worked with both the Obama and Trump administrations on the softwood lumber dispute believes that until this week, the discussions were more substantive with the current administration than with its predecessor.

READ MORE: For a troubled Trump, Canada is easy pickings

So what happened? Two things, perhaps. First, Trump has been having a lousy time on trade, which was one of the two or three top issues that got him elected. He can’t get his nominee for chief trade representative, Robert Lighthizer, confirmed. He hasn’t been able to formally start the 90-day process toward a NAFTA renegotiation. He’s backed down on a trade fight with China, which is the fight some Trump aides entered politics to wage (if you have some time, check out this astonishing documentary by Peter Navarro, now a trade advisor to Trump).

What’s left? I’m told that at 1:46 p.m. on Monday, Fox News carried an interview with a Wisconsin dairy farmer who has hit hard times and blames Canada. The President was watching, and was greatly displeased. Coming as it did on the heels of Trump’s visit last week to the Snap-On Tools plant in Kenosha, the Fox News story egged the President on in his growing suspicion that Canada, far from being cuddly and Ivanka-friendly, is actually a marauding border-squatting trade succubus.

The relationship has come so far, so fast. Only three days after Trump’s inauguration, his informal economic advisor Stephen Schwarzman was in Calgary briefing the Trudeau cabinet on bilateral affairs. In remarks to reporters, Schwarzman was full of sunshine. “One of the important things is the unusually positive view that’s held of Canada,” he said. “Canada’s been a great partner of the United States for as long as anybody can remember.” Trump’s arrival might portend “a changed climate, maybe some modifications,” Schwarzman said. But “basically things should go well for Canada.”

READ MORE: Donald Trump flops and flubs and goes after Canada

And now? The 20 per cent tariff that seems about to hit Canadian lumber exports to the U.S. is neither unexpected, I’m told, nor out of line with earlier U.S. tactics during this interminable dispute. And Canadian officials continue to talk regularly with their U.S. counterparts at senior levels. It’s not inconceivable there could be an agreement within weeks, the Canadians believe.

But Canadian officials cannot discern any consistency in the Trump administration’s tone from day to day. If prospects of an agreement fade, the Trudeau government, finding itself in a fight, may decide to push back. I can detect no sign of a rush to get to that point.

The prime minister won’t have to spend much time wondering what business leaders think he should do. He had already scheduled a lunch meeting on Tuesday in Kitchener with the Business Council (formerly Canadian Council of Chief Executives, formerly Business Council on National Issues), the blue-chip CEO group led by former Liberal cabinet minister John Manley. They may be able to help him gauge next steps. Surely, even at this late hour, Trudeau still hopes the storm will blow over.

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