Trump's steel tariff could drive up Canada's military procurement costs

A move by U.S. President Donald Trumpto slap tariffs on Canadian steel would have a boomerang effect on Washington and drive up the cost of buying military equipment for both countries, newly released documents show.

Alarm bells started ringing months ago at National Defence over the notion that the U.S. Commerce Department might impose import duties.

Defence Minister Harjit Sajjan was briefed about the perils last spring, shortly after the Trump administration initiated an investigation.

Such measures would be a threat to the unique relationship between the two countries, which "share the most integrated defence industrial base in the world," said a 12-page briefing note obtained by CBC News under access to information legislation.

American market share in jeopardy

It warns of "increases" in the cost of defence hardware which, in some cases, is already astronomically high.

Not only would U.S. defence contractors face higher prices for what they build and sell to the Pentagon, their market share in Canada would be in jeopardy.

"The Government of Canada buys more military hardware from the U.S. than anywhere else, promoting interoperability and security of supply," said the May 12, 2017 assessment.

"The Canadian government purchases significant defence goods and services from the U.S. ($1.44 billion annual average). Accordingly, any significant cost increase on U.S. defence end products could limit imports to Canada."

President Trump announced a major new 25 per cent tariffon steel imports and a 10 per cent duty on aluminum.

Those measures are to be implemented next week and are meant to boost U.S. manufacturers the latest front in Trump's trade war.

'Absolutely unacceptable'

Details on whether all countries including Canada will face the same steep tariffs have not yet been released.

Foreign Affairs Minister Chrystia Freeland played the defence cooperation card in responding to the news out of the White House.

"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," Freeland said in a statement.

"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."

The briefing for Sajjanlast springwent even further, expressing the dismay with which senior officials greeted the prospect of steel imports being sucked into the growing trade fight.

"It's hard to believe that imports from Canada could be considered a threat to U.S. national security," said the briefing document.

Highly integrated market

"Any conclusions that imports from Canada threatened U.S. national security interests would ignore the unprecedented alliance we have."

In its submission to the U.S.Commerce Department last spring, Canadian trade officials underlined how highly integrated the American and Canadian steel and aluminum markets have become.

"The U.S. sells more iron and steel to Canada than it buys more than $2.1 billion," said the submission.

"Canada is the number one destination for U.S. steel exports The balance of trade clearly favours the U.S."