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U.S. trade battle with China can favour Canadian retailers

March 25, 2018 | By The Canadian Press

Montreal – U.S. President Donald Trump’s plan to impose tariffs on up to US$60 billion of Chinese imports could help Canadian retailers by further easing cross-border shopping, even though a full-fledged trade war between the world’s two economic superpowers would damage Canada’s economy, experts say.

The Retail Council of Canada said Friday that U.S. tariffs that would raise the prices of Chinese consumer goods, such as electronics, sold in the United States could prompt more Canadians to shop at home.

The United States buys half a trillion dollars’ worth of goods from China every year, from toys to shoes to cellphones, and prices of those products could surge due to a tariff plan announced Thursday. Specifics about which sectors will be targeted remain sparse and a detailed list of products is expected to be developed in two weeks.

U.S. officials say they will try to minimize the impact for American shoppers by mostly targeting products that business buys like computers, IT products, industrial machinery and aircraft parts.


But even if tariffs attempt to avoid consumer sectors, businesses could still pass on any higher costs to consumers.

“Obviously if U.S. prices increase you’re going to see an impact,” said council vice president Karl Littler.

Littler added that lower U.S. demand for Chinese-made goods could help Canadian retailers to drive better bargains from Chinese factories looking to replace lost sales.

And transnational retailers such as Costco, Best Buy and Walmart may ship directly from Canada instead of transporting goods from the U.S. to avoid tariffs, he said.

Canadian Association of Importers and Exporters president Joy Nott also thinks higher prices for goods could encourage more Americans to shop in Canada.

“Not in waves or anything but I think it will level the cross-border type activity,” she said in an interview.

Canadian products that are similar to Chinese goods could also be substituted by American buyers, helping to boost Canada’s export sector.

China announced a US$3 billion list of U.S. goods for possible retaliation – including higher duties on pork, apples and steel pipe – a day after Trump outlined US$60 billion worth of tariffs on Chinese goods.

Further retaliation by China could open the door for more Canadian exports to replace higher-priced American goods, particularly in agriculture.

“That could be of assistance to Canada’s own pork exporters,” said CIBC chief economist Avery Shenfeld.

“We could end up replacing the U.S. as a supplier to China if China imposes restrictions on U.S. products.”

However, there’s still the looming and much bigger problem of an escalation of the battle into a full blown trade war that causes a slowdown in global economic growth, he added.

Because Canada is a nation that depends on exports of commodities, a weaker Chinese economy would also hurt the Canadian economy by reducing sales and prices of raw materials, added Conference Board of Canada chief economist Craig Alexander.

“The tariffs as they’re currently announced is a negative but you’re really worried about is how this can escalate.”

If that happens, there is a risk that the world’s trading system collapses, added Yves Tiberghien, distinguished fellow at the Asia Pacific Foundation of Canada.

“If the trading regime really collapses then we suffer massively,” he said from Washington.
Tiberghien said the Chinese will make the fight long and painful. The result will be a U.S. government that is distracted by China – which could ultimately be good news for NAFTA, he said.

The U.S. has recently softened up on Canada, by exempting it and Mexico from steel and aluminum duties and making concessions in NAFTA concerning automobiles.
“So the ground is completely different from last week.”


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