Unhappy Canada says would retaliate against U.S. steel tariffs

By Leah Schnurr and Andrea Hopkins

OTTAWA (Reuters) - Canada will retaliate against any U.S. tariffs on steel and aluminum products, officials said on Thursday, as Ottawa faced what could be one of the biggest economic threats since Donald Trump became President.

Trump unveiled the tariffs on Thursday but did not make clear whether they would apply to Canada and Mexico, which together with the United States are trying to renegotiate the NAFTA trade deal.

"Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers," Foreign Minister Chrystia Freeland said in a statement, calling any trade restrictions "absolutely unacceptable."

She did not give details and Canadian officials were not immediately available for comment.

Canada buys more American steel than any other country, accounting for 50 percent of U.S. exports, and the steel and aluminum industry is highly integrated, Freeland added.

Miner Rio Tinto said it would continue to engage with U.S. officials to underscore the benefits of the integrated North American aluminum supply chain. Canada is the world's largest supplier of aluminum to the United States.

"Aluminum from Canada has long been a reliable and secure input for U.S. manufacturers - including the defense sector," Rio said in a statement.

The Trump administration - which Freeland generally describes as the most protectionist since the 1930s - has sought to impose tariffs on Canadian softwood lumber and airliners over the last year.

Canada pushed back on both occasions and won a victory in January when a U.S. tribunal rejected Boeing Co calls for punitive duties against Bombardier Corp passenger jets.

"We will always be there to defend workers and industry. We showed it on softwood lumber and showed it with the Boeing case," Trade Minister Francois-Philippe Champagne told reporters in Ottawa.

CIBC economists Royce Mendes and Avery Shenfeld said the tariffs "could be more biting for the Canadian economy than previous moves by the administration" and noted the prospects for retaliation were limited.

"In many cases, Canada doesn't have a domestic source of supply that would benefit from hitting U.S. goods with a tariff," they said in a note to clients. Canada sends 75 percent of its goods exports to the United States.

International trade lawyer Mark Warner said Canada could if it wished apply tariffs on steel or aluminum or other targeted products.

"My hope is that the government does not respond precipitously in tone or action and continues to work for an exemption," he said by e-mail.

(Additional reporting by Susan Taylor in Toronto, writing by David Ljunggren; editing by Grant McCool, James Dalgleish and Susan Thomas)