America and Canada have one of the most important trading relationships in the world.
President Donald Trump met for the first time with Canadian Prime Minister Justin Trudeau on Monday.
“We have a very exceptional trading relationship with Canada,” Trump said at the news conference.
But trade relations between the United States and Canada have not been as smooth as one might think over the years. There have been trade wars, acts of retaliation, allegations of dumping and job losses.
“Our trade relationship is obviously strong… but it has been difficult, despite the agreements we have in place,” says Stuart Trew, an editor at the Canadian Center for Policy Alternatives, a research group in Ottawa, Canada’s capital.
Trump has often criticized Mexico and NAFTA, the trade agreement between the United States, Mexico and Canada. But Canada is rarely mentioned.
Yet there have been more NAFTA claims against Canada – almost all from American companies – than against Mexico. Even today, Canada maintains high tariffs against the United States, and the two sides only recently resolved a bitter dispute over meat.
Most leaders and experts emphasize that trade ties between the two countries are strong and mostly positive. But Canada and America will have many battles along the way.
Trump now wants to renegotiate NAFTA, which will be one of the priorities of his meeting with Trudeau.
1. Canada has more problems with NAFTA than Mexico
Listening to Trump, you might think that Mexico is the bad actor in NAFTA. But since NAFTA’s creation in 1994, 39 complaints have been filed against Canada, almost all of them by American companies. Known in the industry as investor-state dispute settlement, it allows companies to resolve their cases before a panel of NAFTA judges rather than in local courts in Mexico, Canada or the United States. United.
There have been only 23 complaints against Mexico. (For comparison, companies from Mexico and Canada have filed a total of 21 complaints against the United States.)
And increasingly, Canada is the target of American complaints. Since 2005, Canada has been affected by 70% of claims related to NAFTA disputes, according to CCPA, a Canadian investigative firm.
2. The lumber battle between the United States and Canada
NAFTA is not the only sore point. In 2002, the United States imposed tariffs of approximately 30% on Canadian lumber, alleging that Canada was “dumping” its lumber into the American market. Canada rejected this claim and argued that the tariffs cost its forestry companies 30,000 jobs.
“This has been a very sour point in Canada-U.S. relations for a while,” says Tom Velk, an economics professor at McGill University in Montreal.
The conflict originated in the 1980s, when American logging companies said their Canadian counterparts were not playing fair.
Whether Canada actually broke the rules is a matter of controversy.
Canadian officials deny the government is subsidizing lumber companies in Canada. U.S. logging companies still claim this is the case, and a U.S. Commerce Department report found that Canada was providing subsidies to logging companies in 2004. It did not say whether those subsidies were ongoing.
Canada is alleged to have subsidized logging companies because the government owns a lot of land where the wood comes from. This subsidy — in addition to Canada’s huge supply of lumber — has allowed Canada to price its lumber below what U.S. companies can charge.
The World Trade Organization ultimately sided with Canada, denying the U.S. claims, and the two sides reached an agreement in 2006 to end the tariffs.
However, that deal and the resulting grace period expired in October, and both sides are at it again. The Obama and Trudeau administrations were unable to reach a compromise before Obama left office, and the trade issue remains contentious, with U.S. logging companies once again calling for tariffs.
Related: “Without NAFTA,” We Would Be Bankrupt
3. Smoot-Hawley triggers US-Canada trade war
Things got worse during the Great Depression. In 1930, Congress wanted to protect American jobs from global trade. So the United States imposed tariffs on all countries that shipped goods to America in an effort to protect workers.
It was called the Smoot-Hawley Act. Today, it is widely believed that this law made the Great Depression worse.
Canada was furious and retaliated against the United States more than any other country, sparking a trade war.
“Canada was so furious that it raised its own tariffs on certain products to match the new U.S. tariffs,” according to Doug Irwin, a Dartmouth professor and author of “Peddling Protectionism: Smoot-Hawley and the Great Depression.”
For example, the United States increased the tariff on eggs from 8 cents to 10 cents (those are 1930s prices, after all). Canada responded by also increasing its tariffs from 3 cents to 10 cents, a three-fold increase.
Exports declined sharply: in 1929, the United States exported nearly 920,000 eggs to Canada. Three years later, she has only shipped about 14,000 eggs, according to Irwin.
Related: Remember Smoot-Hawley: America’s Last Great Trade War
4. Canada’s extremely high tariffs on U.S. eggs, poultry and milk
Fast forward to today. Smoot-Hawley is long gone, but Canada continues to impose high tariffs on U.S. imports of eggs, chicken and milk.
For example, some tariffs on eggs can reach 238% per dozen. according to at the Department of Agriculture of Canada. Some milk imports, depending on fat content, can be as high as 292%.
“They are so expensive that we cannot pass them off. There are no American eggs in Quebec,” says Velk.
According to the Canadian Embassy in the United States, the reality is very different. Its officials say that despite some high tariffs, Canada is a top export market for U.S. milk, poultry and eggs.
The United States imposes tariffs on certain products from all countries, but they are nowhere near as high as Canada’s.
Experts say these tariffs continue to target some U.S. dairy and poultry producers, some of whom have difficulty selling into the Canadian market. But they doubt much will change since the tariffs have been in place for decades.
Related: These Reagan Tariffs Trump Loves to Talk About
5. Chief COOLers and the future of NAFTA
Despite all these disputes, experts emphasize that these trade relations remain among the best in the world.
In fact, the two countries are so interconnected today that when trade disputes arise, American companies sometimes side with Canadian companies and oppose American laws.
For example, Canadian meat producers challenged a U.S. law that required them to label where livestock were born, raised and slaughtered. Canadians said the law discriminated against the sale of their meat in the United States and took the matter to the WTO.
The WTO sided with Canada, and last December Congress repealed the country of origin labeling law. American meat producers – whose operations are closely linked to those of Canada – have actually supported their Canadian counterparts, arguing that the regulations are too burdensome.
As for Trump’s proposal to destroy NAFTA, many American and Canadian experts say it is not worth renegotiating or ending it. The three countries that are part of the agreement are so intertwined with each other that untangling all of this integration would be detrimental to trade and economic growth.
–Editor’s Note: This story was originally published on August 11, 2016. We have since updated it.
CNNMoney (New York) First published February 13, 2017: 11:11 a.m. ET
