US Steel for Canadian Warships

By: David Pugliese, The Vancouver Sun 

The Canadian navy’s new supply ships are being constructed of U.S. steel even as President Donald Trump punishes Canadian producers of the same product with a 25-per-cent tariff.

The supply ships are being built at the Vancouver shipyards of Seaspan, which is owned by a U.S. company. The Department of National Defence confirmed the steel is being purchased from a mill in Alabama, a solidly Republican state that voted 62 per cent for Trump.

Defence Minister Harjit Sajjan cut some of the first U.S. steel for the ships at a June 15 ceremony, the same day that Trump launched yet another verbal attack on Prime Minister Justin Trudeau while praising North Korean dictator Kim Jong Un.

Trump has brought in tariffs of 25 per cent on Canadian-made steel and 10 per cent on Canadian aluminum. His government has stated that Canadian steel and aluminum pose a national security threat to the U.S.

Trump also lashed out at Trudeau as “dishonest and weak,” after the prime minister reiterated his position that U.S. steel and other products would face retaliatory tariffs. In addition, Trump has promised to punish Canadians in other ways on the economic front.

The government awarded Seaspan an initial $66-million contact to begin building 52 sections of the new naval supply ships, or about 20 per cent of the vessels. DND said the steel for the ships was ordered “a number of months ago.”

“While Canadian mills will continue to be considered for future chapters of the project, there simply was no Canadian mill who could supply the required certified steel of suitable size and grade at the time it was required,” the DND said in an email.

But Joseph Galimberti, president of the Canadian Steel Producers Association, said domestic firms can supply enough product.

“There is capacity in the Canadian steel industry to participate in these projects,” he said Wednesday. “As a general rule, we have very high quality, quite innovative, extraordinary cost-effective producers in Canada and would like to be considered for participation” in the government’s shipbuilding programs.

Galimberti pointed out that U.S. steel producers actively lobbied the Trump administration to make sure their Canadian competitors faced tariffs. The situation with the supply ships sees those U.S. firms protected in their home markets but still profiting on sales for a Canadian government project, he noted.

“If you wanted to respond to the U.S. tariffs but you are exempting U.S steel producers who are behind the U.S. tariffs, then you have failed,” Galimberti added.

Two supply ships will be built at Seaspan. The project will cost $3.4 billion, of which 60 per cent goes for the construction of the ships.

Defence Minister Harjit Sajjan, left, cuts steel for the first of two Joint Support Ships for Canada’s Navy at the Seaspan Shipyards in Vancouver, June, 15, 2018. JONATHAN HAYWARD/THE CANADIAN PRESS

At one point, the first ship was supposed to arrive in 2012. That has been changed a number of times, with the government later hoping for a 2018 delivery and then a 2019 arrival for the first vessel. DND is now hoping for the delivery of the first ship in 2022 or 2023. The Joint Support Ships are critical as they provide fuel and supplies for warships at sea. The Royal Canadian Navy retired its last two aging supply ships years ago.

Trump continues to threaten various nations, including Canada, with additional tariffs. But his economic policies are also backfiring on some U.S. firms.

Increased steel costs because of the tariffs forced the Mid-Continent Nail plant in Poplar Bluff, Missouri to recently lay off 60 of its 500 employees.

The company is in danger of shutting production by September unless the U.S. government grants it an exclusion from paying the tariffs, company spokesman James Glassman told CNN.

The plant is located in an area that overwhelmingly voted for Trump.

Harley-Davidson has also announced it will move the production overseas of motorcycles to be sold in Europe. The company decided on the move since the European Union has imposed retaliatory tariffs on U.S.-built motorcycles.

Trump responded to the decision by Harley-Davidson by threatening to increase its taxes.

Canada-US Trade Dispute Could Impact US Firms Out in Military Equipment Sales

By: David Pugliese, The National Post 

U.S. President Donald Trump’s tirade against Canada and threats to punish the country could undermine efforts by American firms trying to sell fighter jets and other military equipment to the Canadian Forces, warn defence and industry analysts.

One European firm, Airbus, has already been talking with Canadian officials to pitch its plan to build fighter jets in Quebec as it positions itself to win the $16-billion deal to replace CF-18 aircraft. A similar offer has been made in the past by Dassault Aviation. 

A Canadian Forces CF-18 Hornet comes in for a landing at CFB Bagotville, Quebec, on June 7, 2018. GEOFF ROBINS/AFP/GETTY. 

An Italian aerospace firm, Leonardo, is looking at building helicopters in Nova Scotia as it moves towards negotiations for a search-and-rescue aircraft modernization project the Department of National Defence says will be worth between $1 billion and $5 billion.

Trump has hit Canadian aluminum and steel with tariffs, claiming their import is a threat to national security. After the weekend G7 meeting and Prime Minister Justin Trudeau’s reaffirming that Canada would reciprocate with tariffs on specific U.S. products, Trump vowed more economic grief that will “cost a lot of money for the people of Canada.”

Trump’s move comes at a time when European firms are courting the Canadian government, particularly on big-ticket defence items such as aircraft and warships. Billions of dollars in new purchases are potentially at stake and European firms had a strong presence at the recent CANSEC military equipment trade show in Ottawa.

“Trump certainly isn’t helping U.S. defence companies who want to sell to Canada,” said Martin Shadwick, a defence analyst in Toronto. “It would be very difficult at this point from a political optics point of view for the government to announce awarding contracts to any American firm.”

Shadwick said whether that situation will continue for the next several years, when for instance the decision on new fighter jets is supposed to be made, would depend on any further actions by the president. Two U.S. aircraft, the Boeing Super Hornet and the Lockheed Martin F-35, are among the top contenders in that jet competition. The other three aircraft are from European companies.

An earlier trade dispute with Canada has already backfired on Boeing and the Trump administration, costing the U.S. billions in fighter jet sales. Last year Boeing complained to the U.S. Commerce Department that Canadian subsidies for Quebec-based Bombardier allowed it to sell its civilian passenger aircraft in the U.S. at cut-rate prices. As a result, the Trump administration brought in a tariff of almost 300 per cent against Bombardier aircraft sold in the U.S.

In retaliation, Canada decided against buying 18 new Super Hornet fighter jets from Boeing. That deal would have been worth more than US$5 billion.

Trump certainly isn't helping U.S. defence companies who want to sell to Canada

Christyn Cianfarani, president of the Canadian Association of Defence and Security Industries, said it is too early to determine the impact of the U.S. tariffs on the domestic defence industry. “Tariffs are never good for trade or business,” she added.

“CADSI is monitoring the issue and consulting our members to better understand the potential impact to Canadian firms, both in terms of the direct impact of any tariffs and the more indirect, long term impact on supply chains and market access,” she said.

There is growing concern that Canadian aviation firms could be hurt by Trump’s aluminum tariffs. The Aerospace Industries Association of Canada did not respond to a request for comment. But its counterpart in the U.S. has voiced concern that American aerospace companies could feel pain.

In March, the U.S. Aerospace Industries Association noted it was deeply concerned about Trump’s tariffs on steel and aluminum as it “will raise costs and disrupt the supply chain, putting U.S. global competitiveness at risk.”

“There is also a significant threat for retaliation from other countries towards American ­made products,” the association noted in a statement.

Canada is the largest exporter of aluminum and steel to the U.S.