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TORONTO — The lifting of U.S. tariffs on imported steel and aluminum from Canada is receiving a positive but guarded welcome from industry.

The lifting of the tariffs — to take place within two days of Friday’s announcement — will have a minimal effect on Canada’s overall economy but a sizable impact on a few industries, economists from CIBC Capital Markets wrote.

“The main impact from today’s news will be the improvement in sentiment towards trade with the U.S., something that has been holding back business investment for the past year,” Benjamin Tal and Katherine Judge wrote.

The Trump administration’s imposition of a 25 per cent tariff on steel and a 10 per cent tariff on aluminum from Canada — announced during renegotiations of the North American Free Trade Agreement — has been an ongoing irritant between the two countries.

Among other things, Canada has protested Trump’s imposition of the tariffs for national security reasons — given that the two countries are military allies with highly integrated economies.

The economists noted that Canadian exporters face new complexity because of the need to track the origins of the steel and aluminum they use — a measure to prevent foreign metal from flowing through Canada to the United States.

The chief executive of the Canadian Manufacturers and Exporters Association acknowledged in an interview that the new deal will cause additional complexity but said it’s an acceptable price to get rid of the U.S. tariffs and Canada’s retaliatory tariffs.

“Because all of those were bad for Canadian businesses (and) bad for U.S. businesses. So we’re very pleased they were able to reach an agreement,” said Denis Darby, CME’s president and CEO.

“While there’ll be some challenges. . .  in the long term it will be a better outcome for Canada and for North America.”

Darby added that the CME is hopeful that removing the tariffs will pave the path “to getting the USMCA signed because, of course, that’s an agreement that many of us worked very long and hard on.”

Shares of Ontario-based Stelco Holdings Inc. got a boost in response to news of the agreement between Ottawa and Washington.

The Canadian steel producer’s shares surged to $17.66 Friday before moving lower to $16.99 later in the afternoon, up 10.9 per cent from Thursday’s closing price.

 

Companies in this story: (TSX:STLC)

The Canadian Press

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WASHINGTON — Bogged down in a sprawling trade dispute with U.S. rival China, President Donald Trump took steps Friday to ease tensions with America’s allies — lifting import taxes on Canadian and Mexican steel and aluminum and delaying auto tariffs that would have hurt Japan and Europe.

By removing the metals tariffs on Canada and Mexico, Trump cleared a key roadblock to a North American trade pact his team negotiated last year. As part of Friday’s arrangement, the Canadians and Mexicans agreed to scrap retaliatory tariffs they had imposed on U.S. goods.

“I’m pleased to announce that we’ve just reached an agreement with Canada and Mexico, and we’ll be selling our product into those countries without the imposition of tariffs, or major tariffs,” Trump said in a speech to the National Association of Realtors.

In a joint statement, the U.S. and Canada said they would work to prevent cheap imports of steel and aluminum from entering North America. The provision appeared to target China, which has long been accused of flooding world markets with subsidized metal, driving down world prices and hurting U.S. producers. The countries could also reimpose the tariffs if they faced a “surge” in steel or aluminum imports.

Earlier Friday, the White House said Trump is delaying for six months any decision to slap tariffs on foreign cars, a move that would have hit Japan and the Europe especially hard.

Trump still is hoping to use the threat of auto tariffs to pressure Japan and the European Union into making concessions in ongoing trade talks. “If agreements are not reached within 180 days, the president will determine whether and what further action needs to be taken,” White House press secretary Sarah Sanders said in a statement.

In imposing the metals tariffs and threatening the ones on autos, the president was relying on a rarely used weapon in the U.S. trade war arsenal — Section 232 of the Trade Expansion Act of 1962 — which lets the president impose tariffs on imports if the Commerce Department deems them a threat to national security.

But the steel and aluminum tariffs were also designed to coerce Canada and Mexico into agreeing to a rewrite of North American free trade pact. In fact, the Canadians and Mexicans did go along last year with a revamped regional trade deal that was to Trump’s liking. But the administration had refused to lift the taxes on their metals to the United States until Friday.

The new trade deal — the U.S.-Mexico-Canada Agreement — needs approval the legislatures in the U.S., Canada and Mexico. Several key U.S. lawmakers were threatening to reject the pact unless the tariffs were removed. And Canada had suggested it wouldn’t ratify any deal with tariffs still in place.

Thomas Donohue, president of the U.S. Chamber of Commerce, said the lifting of the tariffs “will bring immediate relief to American farmers and manufacturers. Critically, this action delivers a welcome burst of momentum for the USMCA in Congress.”

Canadian Prime Minister Justin Trudeau credited his government for holding out to get the tariffs removed.

“We stayed strong,” he said. “That’s what workers asked for. These tariffs didn’t make sense around national security. They were hurting Canadian consumers, Canadian workers and American consumers and American workers.”

Trump had faced a Saturday deadline to decide what to do about the auto tariffs.

Taxing auto tariffs would mark a major escalation in Trump’s aggressive trade policies and likely would meet resistance in Congress. The United States last year imported $192 billion worth of passenger vehicles and $159 billion in auto parts.

“I have serious questions about the legitimacy of using national security as a basis to impose tariffs on cars and car parts,” Iowa Republican Sen. Chuck Grassley, chair of the Senate Finance Committee, said in a statement Friday. He’s working on legislation to scale back the president’s authority to impose national security tariffs under Section 232.

In a statement, the White House said that Commerce Secretary Wilbur Ross has determined that imported vehicles and parts are a threat to national security. Trump deferred action on tariffs for 180 days to give negotiators time to work out deals but threatened them if talks break down.

In justifying tariffs for national security reasons, Commerce found that the U.S. industrial base depends on technology developed by American-owned auto companies to maintain U.S. military superiority. Because of rising imports of autos and parts over the past 30 years, the market share of U.S.-owned automakers has fallen. That has caused a lag in research and development spending which is “weakening innovation and, accordingly, threatening to impair our national security,” the statement said.

The market share of vehicles produced and sold in the U.S. by American-owned automakers, the statement said, has declined from 67 per cent in 1985 to 22 per cent in 2017.

But the statistics don’t match market share figures from the industry. A message was left Friday seeking an explanation of how Commerce calculated the 22 per cent figure.

In 2017, General Motors, Ford, Fiat Chrysler and Tesla combined had a 44.5 per cent share of U.S. auto sales, according to Autodata Corp. Those figures include vehicles produced in other countries.

It’s possible that the Commerce Department didn’t include Fiat Chrysler, which is now legally headquartered in The Netherlands but has a huge research and development operation near Detroit. It had 12 per cent of U.S. auto sales in 2017.

The Commerce figures also do not account for research by foreign automakers. Toyota, Hyundai-Kia, Subaru, Honda and others have significant research centres in the U.S.

Meanwhile, Trump is locked in a high stakes rumble with China. The U.S. accuses Beijing of stealing trade secrets and forcing American companies to hand over technology in a head-long push to challenge American technological dominance. The two countries have slapped tariffs on hundreds of billions of dollars in each other’s products. Talks broke off last week with no resolution.

The hostilities between the world’s two biggest economies have weighed heavily the past couple of weeks on the U.S. stock market, threatening a long rally that Trump touted as a vindication of his economic policies. Opening a new front in the trade wars against EU and Japan likely would have worried investors even more.

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Rob Gillies reported from Toronto and Tom Krisher from Detroit. Darlene Superville, Deb Riechmann and Martin Crutsinger in Washington and Geir Moulson in Berlin contributed to this story.

Paul Wiseman, Tom Krisher, Kevin Freking And Rob Gillies, The Associated Press



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Consumers will likely see little change in their travel choices or ticket prices if Air Canada buys Transat AT Inc., industry observers said Friday.

They added it’s unlikely another bidder will upset the proposed merger, nor is it likely to be waylaid by required reviews by federal transport and competition regulators.

Shares in the parent company of airline Air Transat were little changed Friday after rising more than 13.4 per cent on Thursday to a closing price of $12.

That’s a dollar less than the $13 per share or $520 million offer Air Canada announced Thursday, as it said it had entered into a 30-day exclusive arrangement with Transat to try to negotiate its purchase.

Air Canada shares, meanwhile, rose by 1.6 per cent by 3 p.m. EDT on Friday to a new all-time high of $41.04.

“We do not expect a higher bid,” said analyst Kevin Chiang of CIBC World Markets in a report.

He said the offer represents a premium of 148 per cent over the 20-day average share price before Transat announced on April 30 that it was in discussions with unnamed parties for a potential sale.

Some observers said Thursday they fear a successful bid will result in fewer choices and higher ticket prices but AltaCorp Capital analyst Chris Murray said Friday there’s more likely to be an expansion of routes.

“As to competition and pricing, I don’t see the combination impacting competition as you still have a number of Canadian competitors including WestJet and the new ULCCs (ultra low-cost carriers), including Flair Airlines, as well as international carriers,” he said in an email.

Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.

The timing of Air Canada’s announcement was probably linked to last Monday’s news that Toronto-based Onex Corp. had struck a deal to buy Calgary-based WestJet Airlines Ltd. for about $3.5 billion, thus providing a funding source for growth, said independent airline analyst Rick Erickson.

But neither deal is expected to harm travellers.

“We’re going to see very little change in terms of consumer benefit and I see little if anything at all on the cost front,” he said.

He added he doesn’t know of any domestic party that can afford to outbid Air Canada, and pointed out foreign ownership of any Canadian airline is limited to 49 per cent, which makes a bid from outside Canada unlikely.

Travel consumers shouldn’t worry about a lack of competition if the two airline announcements go forward, said Wendy Paradis, president of the Association of Canadian Travel Agents.

“I think we certainly need to watch what happens, pay attention, but I think that, having two really strong carriers in Canada, there still will be lots of choice,” she said.

She added Canada’s other charter airlines such as Sunwing and Sunquest will continue to provide competition on Transat’s holiday routes.

On transatlantic routes this summer, Air Canada has 42 per cent of total industry seat capacity and Transat has 18 per cent for a potential combined 60 per cent, wrote National Bank analyst Cameron Doerksen in a report.

But he pointed out that new competitors are growing in the Canada-Europe market including WestJet and several Europe-based leisure-focused carriers.

The transaction would result in a combined Caribbean/Mexico sun destination market share of 46 per cent for Air Canada, he added.

“We see the sun destinations as less of a concern because there would still be two large and well-established competitors in Sunwing and WestJet Vacations, plus there is nothing stopping new entrants (including potential new ULCC start-ups in Canada) from entering these markets,” said Doerksen.

The deal provides for a break fee of $15 million payable by Transat if it accepts a superior offer.

 

Follow @HealingSlowly on Twitter.

 

Companies in this story: (TSX:TRZ, TSX:AC, TSX:WJA)

Dan Healing, The Canadian Press


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(AP Photo/Charles Rex Arbogast)

For decades, baby boomers fueled Canada’s economic and corporate growth. But now, the generation is leaving the workforce—in droves. As they retire, what could follow is an economic slowdown, strains on healthcare and pension plans and a shrinkage in the labour force, experts say. To counteract these effects, Canadian employers need to find a way to retain their aging employees.

“A lot of companies are starting to wake up to the risk, and realize their need to hold onto senior workers,” said Chris Farrell, author of Unretirement: How baby boomers are changing the way we think about work, community and the good life.

Back in 2015, an estimated 250,000 baby boomers retired each year. Over the next few years, retirement rates for the age group will nearly double, reaching 400,000 annually, as reported by the Globe and Mail. To hold on to older workers, Farell argues flexibility will be key. Companies need to consider offering flexible hours and part-time work to their senior employees. “The theme of workplace flexibility is only going to grow in significance and power across generations,” he said. “People want to work but also need that flexibility built into their schedules.”

READ MORE: Deals are set to surge as baby-boomer entrepreneurs reach retirement

Many companies are looking at ways to attract boomers as employees. McDonald’s recently announced plans to hire 250,000 new employees over the age of 55 this summer through a partnership with the American Association of Retired Persons (AARP). It’s a move partly driven by a shortage of a younger workers— a challenge also faced by Canadian employers.

But hiring older workers isn’t just about filling a gap in the job market. As more baby boomers trickle out of the job market from positions of seniority, they take with them their skills and experience. “There are certain areas and professions where we’ve failed to train younger workers adequately,” said David Dodge, a former director for the Bank of Canada who studied economic and demographic trends. While employers have historically relied on immigration to fill these spots, Dodge says the “end solution” should be training the next generation of employees.

Parisa Mahboubi, senior policy analyst with the C.D. Howe Institute, says training and recruitment programs will help equip the post-boomer generations with the skills needed to be as successful as their labour force predecessors. These training programs also allow senior employees to upgrade their skills and stay relevant. Mahboubi warns most employers haven’t yet provided these resources in way that leads to a “meaningful impact.” For that reason, Mahboubi favours a multifaceted approach to address the boomers’ retirement. In addition to retaining senior employees and training new ones, she says maintaining a healthy stream of immigration and reducing barriers for marginalized groups to enter the workforce are also needed. “There is no one solution to mitigate the impact of an aging workforce,” she says. “But each solution contributes to a certain extent.”

Yet implementing these pre-emptive measures takes time and planning. And according to experts like Dodge, Canadian companies have been slow in addressing the risks to inevitably accompany the impending boomer bust: “I wouldn’t call it a disaster, but we’re not doing as well as we should be.”

Still, as employers plan to counteract these risks, they should bank on having some seniors sticking around. “The notion that you would go to school, work hard for 30 years, then retire just doesn’t exist anymore,” said Farrell.

Now that people live longer and healthier lives, many seniors are staying in their cubicles longer. At the  age of 77, Keith Ambachtscheer sits as director emeritus of the Rotman International Centre for Pension Management, a research-based company. (He forfeited his previous role as director when he was “only 72”). Ambachtscheer also acts as president of KPA Advisory Services, which he launched in the 1980s. These days, he’s working on the company newsletter, writing 2,000 words each month, just like he’s been doing since 1985.

“With jobs like mine, there really is no such thing as retirement,” he says, chuckling. “I just go from one thing to the next.”

MORE ABOUT BABY BOOMERS:

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NEW YORK — Walmart warned on Thursday that higher tariffs on imports from China will mean higher prices.

The comments came after the nation’s largest retailer reported its best sale performance at its established U.S. namesake stores for the fiscal first quarter in nine years. It marked 19 straight quarters of same-store sales gains.

“We’re monitoring the tariff discussions and are hopeful that an agreement can be reached,” said Chief Financial Officer Brett Biggs. But he told reporters, “Increased tariffs will lead to increased prices for our customers.”

Walmart declined to comment on what type of price hikes shoppers could expect and which products would get the biggest increases. But the spectre of higher prices was also echoed by Macy’s CEO Jeff Gennette. He told investors Wednesday that if a fourth round of tariffs takes effect, that could mean higher retail prices for both store label and national brands. Target, J.C. Penney and other major retailers will be reporting results in the next few days and should shed more light on the issue.

Walmart, Macy’s and other major retailers have been left largely unscathed by the first several rounds of tariffs since they focused more on industrial and agricultural products. But that changed last week when the Trump administration slapped 25% tariffs on imports like furniture. The administration wants to extend the 25% tariffs to practically all Chinese imports not already hit with levies including toys, shirts, household goods and sneakers. That’s roughly $300 billion worth of products on top of the $250 billion targeted earlier

Walmart and others have benefited from a continued strong economy and low unemployment, but shoppers continue to look for deals. In particular, Walmart’s core customers who live paycheque to paycheque would be particularly sensitive to any price increases. Still, Walmart has clout with its suppliers and is working with its manufacturing partners to mitigate the impact.

Such looming extra costs come as Walmart is investing more in its business to compete with online leader Amazon in a fight to see who can get packages to customers faster.

Walmart launched free next-day delivery on its most popular items this week in Phoenix and Las Vegas. It plans to roll out next-day delivery to most of the country by year-end, covering 220,000 popular items from diapers to toys, with a minimum order of $35. Walmart has said the costs for next-day delivery are lower versus two-day service because eligible items will come from a single fulfilmentcentre located closest to the customer. This means orders will ship in one box, or in as few as possible, unlike two-day deliveries that come in multiple boxes from multiple locations.

The announcement was made two weeks after Amazon said it would upgraded its free shipping for members from the standard two-day delivery, to one day.

Walmart, based in Bentonville, Arkansas, said that U.S. sales at stores opened at least a year rose 3.4% during the fiscal first quarter, fueled by its grocery business.

U.S. e-commerce business rose 37%, helped by strong sales in fashion and home goods. Walmart’s online growth was also fueled by its continued expansion of online grocery services, including curbside pickup and home delivery.

Walmart has about 2,450 stores that offer free grocery pickup for customers who shop online. It also has nearly 1,000 stores that offer same-day grocery delivery. The company said it was on track to offer same-day grocery delivery from 1,600 stores, while also offering grocery pickup from 3,100 stores by year-end.

Walmart’s Sam’s Clubs posted a 0.3% increase in same-store sales, excluding fuel.

Walmart is also testing innovative new ways to cut costs and make workers more efficient. It officially opened a lab in a Neighborhood Store , a smaller grocer concept, in Levittown, New York, that has thousands of cameras that mind the store and help keep track of items that need to be replenished. It’s hoping to scale some of the technology to other stores.

The company reported first quarter net income of $3.84 billion, or $1.33. Earnings, adjusted for non-recurring gains, came to $1.13 per share. That beat per-share earnings projections by 11 cents, according to a survey of industry analysts by Zacks Investment Research.

Revenue was $123.93 billion, missing forecasts for $125.33 billion. Excluding currency impacts, Walmart’s revenue rose 2.5 per cent to $125.8 billion.

Walmart Inc. stuck to its outlook for the year. Shares rose $2.81, or nearly 3%, to $102.61 in afternoon trading.

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Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

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Portions of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WMT at https://www.zacks.com/ap/WMT

Anne D’Innocenzio, The Associated Press






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