WASHINGTON (AFP) - Trade tensions spiked between Washington and Ottawa on Tuesday (April 25) as President Donald Trump accused Canada of being "very rough" on its southern neighbour and threatened to retaliate against new restrictions on US dairy products.

Trump also touted his administration's surprise decision late on Monday to rekindle an old trade conflict with America's second-largest trading partner by slapping new tariffs on Canadian softwood lumber.

"People don't realise, Canada has been very rough on the United States. Everyone thinks of Canada of being nice but they've outsmarted our politicians for many years," Trump told a group of farmers at the White House.

He said Canada was hurting American dairy farmers near the border, from Wisconsin to New York, by blocking dairy exports "and we're not going to put up with it."

Trump's aggressive comments echoed a tweet he sent earlier in the day, just hours after the Commerce Department announced it was imposing tariffs of up to 24 per cent on Canadian softwood lumber, which it says is improperly subsidised.

Addressing reporters at the White House on Tuesday, Commerce Secretary Wilbur Ross said the twin disputes underline the problems with the North American Free Trade Agreement linking the United States with Canada and Mexico, which Trump has vowed to renegotiate.

"If NAFTA were functioning properly, you wouldn't be having these kinds of very prickly and unfortunate events back to back," Ross said. "They are generally a good neighbour. That doesn't mean they don't have to play by the rules."

Canadian Prime Minister Justin Trudeau responded to the unexpected burst of tough rhetoric by vowing his government would be "very firm in defending Canada's interests." But Trudeau also said his officials "will work constructively together" with the United States to find a solution.

DAIRY DILEMMA

Canada's dairy sector is protected by tariffs on imports and controls on domestic production as a way to support prices for the country's farmers.

The latest row was triggered when Canada extended those policies to apply to ultrafiltered milk, a product used in cheese production and at the center of a thriving US export business.

The US Dairy Export Council said the extension "blatantly blocks American dairy exports," urging Trump to "take immediate action" to protect the business of dozens of US farmers.

While no other immediate retaliation was planned against Ottawa, Ross said Washington was looking into measures to "correct" what it says is an effective block on a new class of US dairy exports.

"The problem with dairy isn't that they're dumping dairy products in the US. The problem is worse. They are prohibiting US dairy producers from selling their products in Canada," Ross said.

The softwood lumber dispute between Washington and Ottawa has also seen many twists and turns for nearly 35 years, with US producers accusing their Canadian counterparts of exporting lumber at subsidised prices, harming American businesses.

In the long-standing dispute, the Commerce Department announced late on Monday that after talks with Ottawa failed to yield an agreement, it would impose duties of between three and 24 per cent on softwood lumber, used for flooring, siding and other building products.

Ross justified the duties by saying Canadian firms "charge a subsidised low price when the products hit the US border."

The US Commerce Department said it will conduct a thorough investigation and confirm its position on the lumber tariffs by Sept 27. If confirmed, the tariffs would then have to be approved by the US International Trade Commission.

'PROTECTIONIST'

Officials in Canada rejected the claims and called the duties "unfair and punitive."

"The accusations are baseless and unfounded," Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr said in a statement. "We remain confident that a negotiated settlement is not only possible but in the best interests of both countries."

Softwood lumber imports from Canada last year totalled US$5.66 billion (S$7.8 billion), and were regulated under a bilateral agreement reached in 2006, which expired in 2015.

Producers north of the border reacted furiously to the ruling.

"These duties are unwarranted, and this determination is completely without merit," said Susan Yurkovich, president of the British Columbia Lumber Trade Council.

"The allegations made by the US lumber lobby are the same arguments they made in prior rounds of litigation, all of which were rejected and overturned by independent Nafta panels," she said, denouncing a "protectionist" attempt to "create artificial supply constraints on lumber and drive prices up."