Foreign Affairs Minister Chrystia Freeland has warned U.S. Commerce Secretary Wilbur Ross that a border adjustment tax would hurt businesses in both countries.
Ms. Freeland spoke by telephone Thursday with Mr. Ross, the man tapped by President Donald Trump to lead the renegotiation of the North American free-trade agreement.
The minister wasted no time letting Mr. Ross, who was sworn in last week, know that Canada opposes any sort of border tax – a protectionist economic measure some Republicans have endorsed as a way of curbing foreign imports.
"The minister raised the potential implications and costs of any U.S. border adjustment tax on both American and Canadian businesses and families," read a description of the call released by Ms. Freeland's office.
Ms. Freeland also impressed upon Mr. Ross the importance of getting a resolution on the countries' softwood lumber file and the significance of the steel industry, the statement said.
"In recognition of their common responsibility to create jobs and foster economic growth, both the Minister and Secretary emphasized how the secure and efficient flow of goods, services, capital, and people across our border is vital to the livelihoods of millions of Americans and Canadians," it said.
Ms. Freeland's conversation with Mr. Ross comes just a day after the Commerce Secretary warned that the U.S. would extract "concessions" from Mexico and Canada in NAFTA talks. In an interview with Bloomberg Television, Mr. Ross said Mr. Trump's tough talk had softened up the other countries so they would be willing to accept the concessions without much of a fight.
"The Mexicans know, the Canadians know, everybody knows times are different. We are going to have new trade relations with people. And they all know they're going to have to make concessions," Mr. Ross said.
A border adjustment tax would force American companies to pay a tax on foreign goods they purchase, motivating them to instead purchase from U.S. suppliers.
Such a move could hurt Canadian companies, particularly those that are part of the supply chains of U.S. firms in manufacturing businesses – the automotive sector, for example – by making those companies' products less attractive to the American market. The tax could also be a drag for U.S. companies that will either have to pay higher prices or find new suppliers.
Speaker Paul Ryan has proposed the tax, and Mr. Trump has not ruled it out. Such a move would fit with the President's protectionist economic agenda.
Mr. Trump is also pushing for U.S. oil and gas pipelines to be made from American steel, an edict that could be worrisome for the Evraz plant in Regina, which supplies steel pipe to the U.S. market.
While Ottawa has taken a cautious approach in dealing with Mr. Trump – seeking to persuade him that preserving the two countries' open market is in everyone's best interest – Ms. Freeland has been willing to push back with the new administration in Washington.
In a meeting with Secretary of State Rex Tillerson last month, she cautioned that Canada would retaliate if the U.S. imposes any new tariffs in NAFTA renegotiations.
Ms. Freeland's statement Thursday said she and Mr. Ross had agreed to meet in person.