[A]fter the United States and Canada exchanged jabs in an escalating trade conflict, Chris Carrigan of the Vermont Chamber of Commerce was on the phone with aerospace industry players on both sides of the northern border.
“It creates uncertainty, and businesses like certainty,” Carrigan said of the heightening tensions.
Carrigan focuses on the aerospace and aviation industries for the Vermont chamber, and has been part of an effort to build cross-border partnerships linking Vermont-based parts manufacturers with Quebec’s aerospace hub.
While Carrigan was optimistic about the strength of local relationships, the early take was one of concern.
“The knee jerk reaction is prices are going to go up … and that’s going to eat into net profits,” he said.
Vermont industries could be caught in the crosswinds of escalating trade tensions between the United States and Canada.
State officials and business leaders are looking at how a new round of tariffs between the United States and Canada will hit agriculture, aerospace and other businesses in the Green Mountains.
President Donald Trump on Friday announced he would proceed with tariffs on steel and aluminum imports from Canada, Mexico and the European Union. The decision ended an exemption that had been in place for those countries since his administration imposed the tariffs earlier this year.
The move prompted an immediate international backlash.
Canadian officials responded with a long list of tariffs Canada will impose in retaliation on American goods, including metal goods, whisky and maple syrup, effective July 1.
Prime Minister Justin Trudeau called Trump’s reasoning for imposing the tariffs “inconceivable.”
The Trump administration argues the tariffs are a matter of national security.
According to a release from the White House on Thursday, high levels of imports of steel and aluminum drive closures of manufacturing plants in the United States. That could leave the United States short of producers if there were a sudden need for the country to shore up defense and critical infrastructure in the case of an emergency.
While the decision drew applause from some in the industry, it was sharply criticized by lawmakers on both sides of the aisle in Washington — including Republican leadership on the Hill — for the negative effect it is likely to have on relationships with key American allies and on the American economy.
“This is dumb,” one Republican senator said of the development.
Sen. Patrick Leahy, D-Vt., rebuffed Trump’s “rash actions” as an ill-conceived effort to bolster domestic manufacturing jobs.
“That he is doing it all under the guise of national security in the same week that he tweeted he would cut China a break on ZTE — an actual national security issue — demonstrates how erratic and ungrounded his actions are, threatening the system of U.S.-led alliances that greatly aid our farmers and manufacturers in selling American goods abroad,” Leahy said.
Vermont could be hit hard by “this ham-handed policy,” he said.
Sen. Bernie Sanders, I-Vt., denounced Trump’s plan as “haphazard and reckless.” If Trump were serious about saving jobs, Sanders said, he would block federal funding from going to companies that outsource jobs.
“It simply makes no sense to start a trade war with Canada, the European Union and others who are engaged in fair trade, are not cheating, and where workers are paid a living wage with good benefits,” Sanders said.
The escalating tensions between the United States and Canada have high stakes for Vermont’s economy, which relies heavily on cross-border trade.
Of the state’s $3 billion in total international exports in 2016, more than a third went to north. Vermont exports to Canada were valued at $1.2 billion, according to the U.S. Trade Representative. That represents 40 percent of the state’s total exports.
Canada is by far the largest international market for Vermont goods. The country took in nearly four times the amount of the state’s next largest export market, Hong Kong, which took in $352 million in trade from Vermont.
A media contact for the U.S. Department of Commerce did not respond to a request for comment Friday about the impact of the tariffs.
Vermont Secretary of Commerce and Community Development Michael Schirling said it’s too early to quantify the impact of the changes on Vermont’s economy.
“Anything that harms our relationship with Canada is not good,” Schirling said.
“We enjoy such a close relationship that it makes it difficult when these types of things are going on,” he said.
Schirling said it is possible the changes could have a positive impact on some of the state’s businesses, but he was not clear what that upside would be at this point.
He said he is concerned about what the changes could mean for prices Vermont consumers pay, for business costs, and about the uncertainty created.
The state is particularly concerned about how the tariffs will hit agriculture and the automotive and aerospace engineering sectors.
Maple, for instance, is one area likely to see changes. According to Schirling, Vermont actually imports more maple syrup than it exports. Imported maple is then processed in the state. That industry could be affected, he said.
The new tensions come as the U.S. is nearly a year into renegotiating the terms of the North American Free Trade Agreement, a trade bloc with Mexico and Canada. Trump vowed on the campaign trail to scrap the agreement.
Vermont officials say the agreement is key to the state’s economy. Schirling sees a need to for some “modernization” of the 25-year-old agreement, but he said it is difficult to discern the direction the country is headed in now.
“There’s not a clear path to where we’re headed” on NAFTA, or on the steel and aluminum tariffs, Schirling said.
He sat in on a conference call with the White House about the negotiations this week. He said he would like to see the administration ask states that deal with Canada and Mexico for input on revising NAFTA.
“It would be helpful to have some context and it would be helpful for folks to look to the states for guidance on how to develop those relationships,” Schirling said.
Carrigan, whose focus is on aerospace and aviation with the Vermont Chamber of Commerce, has been working on including Vermont in an aerospace manufacturing corridor between two hot spots in the industry — Quebec and Connecticut.
Montreal is one of just three places in the world where commercial planes are built from the ground up, according to Carrigan.
While he had some concerns about the impacts of the tariffs, he was optimistic that the relationships state businesses and commerce experts have forged will endure through the tumult in the relationship between the two countries.
“I think that our Canadian partners understand that what we’re doing at the local level is valued and should be continued regardless of what’s happening at the federal level,” Carrigan said.
Small business owners are bracing themselves for an impact as well.
Dori Ross is founder Tonewood Maple, which is a business that straddles the border, based between Vermont and Canada, she said.
“I’m watching it closely because I do straddle the border and depending on where things are favorable, I’ll probably manage my business on both sides of the border until this unfortunate mess gets resolved,” Ross said.
The U.S. is currently the largest importer of Quebec maple syrup, she said. Canada is working on reducing tariffs on its maple trade to Europe, which could have big implications for the market.
For Ross, she will be watching to see if managing her business on both sides of the border continues to make sense.
“If this continues, it may not be viable for me,” she said.
