Ask Canadian officials and they’ll say the counter-tariffs Ottawa imposed on American products were a dollar-for-dollar response to U.S. tariffs imposed on Canadian steel and aluminum.
Kentucky’s Republican governor has his own theory: Canada did it to make money.
“People can say it was for tit-for-tat, and maybe arguably so, but it’s a straight up money grab,” Gov. Matt Bevin said in an interview with CBC Radio’s The House at his office in the majestic marble-domed state capitol building in Frankfort, Kentucky.
When Canadian retaliatory tariffs totalling $16.6 billion were imposed on the U.S., Kentucky was carefully targeted. The 10 per cent duties on the state’s major exports, like bourbon and playing cards, were meant to pressure notable Republicans like Senate Majority Leader Mitch McConnell and Senator Rand Paul. Both hail from the Bluegrass State.
Since July, the Canada Border Services Agency has collected nearly $300 million from the tariffs.
But Bevin — who speaks often with Prime Minister Justin Trudeau and members of his cabinet — argues that Trudeau’s Liberals noticed Canadians have a fondness for Kentucky-style whiskey and saw a way to make a profit.
U.S. President Donald Trump slapped Canada with the metal tariffs under the Trade Expansion Act’s Section 232, claiming the dumping of foreign steel and aluminum — which the administration later admitted was mostly the fault of China — threatened national security.
‘The citizens will pay for it’
The governor, who is up for re-election in 2019 in a state that historically has put Democrats in his job, argues duties are imposed either for national security or for money. He accuses Canada of padding its bottom line at its citizens’ expense.
“You don’t have a bourbon industry in Canada. No Canadian citizen is going to see any direct benefit from that, the government will use those monies for whatever,” Bevin said.
“The citizens will pay for it.”
Canada is Kentucky’s largest trading partner, accounting for just under $8 billion in exports each year. Trade with its next largest trading partners — the U.K. and France — doesn’t amount to even half of that.
While cars and vehicle parts account for most of the state’s exports, its bourbon is a popular import in Canada and the industry is suffering under the weight of the tariffs.
“I don’t know about whether this is a cash grab or not, but what I do know is when elephants fight, the grass gets trampled,” said Kerri Richardson, the president of the board of the Bourbon Women Association.
“As bourbon grows, Kentucky grows … Everybody has a stake in it.”
It’s not just the distillers. Almost 18,000 jobs in the state rely on the liquor trade — from the farmers who grow the corn, to the truckers who transport it, to restaurant owners and their serving staff.
Stocks of bourbon worth billions of dollars are aging in the state right now, and with every bottle that crosses the border, Kentucky’s bourbon industry fears Canadian consumers will give up and pick a different drink because of the increased cost.
Tariff tiff bled into NAFTA
Bevin bristled when asked about his stance on tariffs, insisting it wasn’t his place to weigh in on how long the duties should remain in place.
Pressed, he admitted the retaliatory taxes were damaging his state and he’d rather see Trump’s tariffs gone.
“I’m a big believer, personally, in free market economies,” he said, adding he still fully supports the Trump administration’s stated goal of boosting the American economy.
Now that a new USMCA trade deal is provisionally in place, Bevin said he thinks it’s safe to call the situation a “win-win” because all sides compromised.
“Any time there’s a negotiation of any kind, nobody ever gets everything they wanted.”
Trump repeatedly tried to use the tariff threats as a way to exert leverage in the American side’s favour.
“If countries will not make fair deals with us, they will be ‘Tariffed!'” he tweeted in September.
Foreign Affairs Minister Chrystia Freeland said during the negotiations that the Canadians were trying to treat NAFTA and the tariffs as two separate issues. However, as the talks became more tense ahead of the October 1 deadline, that tactic shifted dramatically.
Trudeau even said last month that Trump had reassured him directly about the eventual disappearance of the tariffs, and that “if we renegotiate NAFTA … there will be no need to worry about these other things.”
As October 1 drew closer, the Canadians attempted to score an exemption from auto tariffs and work out a way to have the metal tariffs lifted as well.
Success on the first. No success — so far — on the second.
Steel and aluminum tariffs remain in place, but the threat of car duties has been diminished.
Canada will only be hit with them if Trump imposes the surtax worldwide. If that happens, Canada would be subject to a quota — which would be above our current automotive production levels.
Even a Republican governor doesn’t know how the tariff battle will end.
“As it relates to 232, that is gelatinous at best. It isn’t solid. We don’t know where it will ultimately settle out,” Bevin said.
While politicians on both sides of the border continue to push often competing agendas, Kentuckians are paying the price.
“The longer that this continues, the more folks like that are getting hurt,” Richardson said.