Trudeau Says He Will Consider Retaliating Against U.S. Over Tariff -- Update

Canadian Prime Minister Justin Trudeau said Friday he would consider retaliatory measures in response to the U.S. imposing a 20% tariff on lumber imports from its northern neighbor.

Mr. Trudeau said in a letter to the premier of British Columbia that he would "seriously and carefully" review the province's request to respond to the U.S. tariff. The bulk of Canada's softwood lumber, used in the construction of homes, originates in British Columbia.

The Pacific Coast province wants the federal government to ban the shipment of U.S. thermal coal bound for customers in Asia. Ports in Canada fall under federal authority.

U.S. producers have shipped thermal coal, used by power plants to produce electricity, to British Columbia export terminals due to a lack of U.S. capacity in U.S. ports. The British Columbia government estimates that last year the Port of Vancouver handled 6.2 million metric tons of U.S. thermal coal.

British Columbia Premier Christy Clark is in the final stages of a re-election campaign, and her right-leaning Liberal Party is in a tight race with her left-leaning opponent, polling indicates. The prime minister's letter comes four days before residents in Canada's third-largest province head to the polls.

The U.S. Commerce Department imposed the tariff after concluding Canada was unfairly subsidizing its lumber producers. Mr. Trudeau said in his letter to Ms. Clark that Canada "disagrees strongly" with the finding. "The accusations are without merit, as we have made clear to the U.S. administration," he said.

The U.S. decision to impose tariffs "was based on the facts presented, not on political considerations," Commerce Secretary Wilbur Ross said in a statement issued Saturday afternoon in response to Mr. Trudeau's comments. "Threats of retaliatory action are inappropriate and will not influence any final determinations," Mr. Ross added.

The lumber tariff emerged as the Trump administration escalated its rhetoric against Canada and the North American Free Trade Agreement. President Donald Trump said last week he was considering a formal withdrawal from the continental trade pact but decided renegotiation was the best course after speaking with Mr. Trudeau and Mexican President Enrique Peña Nieto.

Not all are pleased with British Columbia's idea of retribution. Westshore Terminals LP, a Vancouver-based coal terminal, urged Mr. Trudeau in a letter last week to reject Ms. Clark's recommendation.

"We hope that our leaders will consider the best interest of all Canadians and not punish Canadian companies and workers by putting one industry ahead of another," the company said in the letter.

Cloud Lake Energy Inc., a Gillette, Wyoming coal producer which ships thermal coal to foreign customers via Westshore's Vancouver terminal, didn't immediately respond to a request for comment.

U.S.-Canada trade watchers said Mr. Trudeau's response was expected given that British Columbia is in the midst of an election. "This is some reddish meat for the national audience," said Mark Warner, a Toronto-based trade and foreign-investment lawyer.

Susan Yurkovich, president of the British Columbia Lumber Trade Council, said the lobby group was encouraged that Mr. Trudeau is putting a high priority on finding a resolution to the lumber dispute. "We are glad Canada is considering all possible options," she said. "It's very unfortunate we are here, but we have to look at the levers we can use to get a deal in place."

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

May 06, 2017 14:55 ET (18:55 GMT)