Prime Minister Justin Trudeau vowed to stand up for Canadian interests on Tuesday after the United States imposed new tariffs on softwood lumber and trade tensions between the two countries escalated, sending the Canadian dollar to a 14-month low.
While the currency fell, shares in Canadian lumber companies rose as the level of the new tariffs came in at the low end of what investors were expecting.
The United States said on Monday it will impose preliminary anti-subsidy duties averaging 20 percent on imports of Canadian softwood lumber, escalating a long-running trade dispute between the two neighbors.
The move, which affects some $5.66 billion worth of imports of the construction material, sets a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.
Speaking to a technology company in Ontario, Trudeau said he would defend the national interest, and cabinet colleagues were poised to speak to the media to outline Canada's possible responses to the tariffs later in the day.
"Standing up for Canada's interests is what my job is, whether it's softwood or software," Trudeau said, prompting applause and cheers.
"Any two countries are going to have issues that will be irritants to the relationship and, quite frankly, having a good constructive working relationship allows us to work through those irritants."
The dispute sideswiped the Canadian currency, reflecting the importance of lumber to the nation's economy. The Canadian dollar weakened to C$1.3613 to the greenback, or 73.46 U.S. cents, nearly a full Canadian cent weaker than Monday's close.
Canadian officials shrugged off the U.S. aggression on softwood lumber and recent attacks by U.S. President Donald Trump on Canadian dairy exports as typical negotiation tactics. But others urged Canada to get tougher.
"In Canada, the perception is that we're always very nice. But we can't get trampled by this guy (Trump)," said Jerry Dias, president of the Unifor union that represents more than 20,000 forestry workers across Canada.
"This is going to have a devastating impact on certain communities," he added. According to Unifor, 600 communities in Canada are dependent on forestry.
Canadian cabinet ministers, who have fanned out across the United States in recent weeks to lobby state governors, mayors, and other policymakers, said the U.S. combativeness on trade won't change the overall strategy.
"There are no victors in a trade war," said Scott Brison, president of the Treasury Board, in a phone interview from Detroit, where he was promoting the value of bilateral trade.
Still, shares of timber companies climbed in response to the move, because the average 20 percent anti-subsidy duties came in below a 20-30 percent range expected by RBC equity analysts.
Shares in West Fraser Timber Co, which would pay the highest duty rate of the affected companies, rose 7.9 percent to C$60.82 and Canfor Corp stock gained 6.4 percent to C$19.34.
Softwood lumber joins dairy as a key target for Trump, who tweeted a new attack on Canada's supply management system for dairy on Tuesday. Last week the president called Canada's dairy protections "unfair."
"Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump tweeted Tuesday morning.