Chest-thumping on tariffs might feel nice, but as the dependent trading partner, it does us no good
Canada can’t benefit from – let alone win – a trade war with the U.S. And Donald Trump knows it
U.S. President Donald Trump may have started a trade war and, if some Canadians have anything to say about it, Prime Minister Justin Trudeau will finish it.
Hit 'em back. Time to man up. Stand up and push back. Canada needs to be armed.
All advice offered by otherwise level-headed thought leaders on what to do about Trump's move to lift the Canadian exemption on steel and aluminum tariffs.
Sure, this kind of chest-thumping makes us feel alive and better, for a time. But now that we've got it off our chests, let's all take a breath.
While we may be at a difficult point in modern relations with the U.S., our collective anger seems more a reflection of the shocked hurt that can only be inflicted by family than it is evidence of irreparable economic damage to Canada. It is our very closeness to Americans that makes us view the U.S. steel and aluminum trade action as a broad, deep betrayal of our entire bilateral relationship.
Many responses are possible – and some are more satisfying than others. But ultimately, Canada needs to be the adult in this situation. Though Canadians should be concerned with the federal government's heel-dragging NAFTA strategy to date, which may have influenced the U.S.'s latest move, what matters now is how Trudeau handles his response. Ensuring he isolates the issue to nothing more than a trade dispute is his best hope of keeping it from escalating. Because Canada can't benefit from – let alone win – a trade war with the U.S. And Donald Trump knows it.
Canada's response so far offers an appropriate combination of seriousness and self-restraint. While totally unlikely to be effective, appeals to the WTO and NAFTA itself are important for reminding the Americans and others that Canada continues to respect the multilateral rules-based order — even if the U.S. administration does not.
Our proposed retaliatory tariffs are more pointed in purpose. And while they will be costly for all involved, they remain a widely accepted tool for addressing trade disputes in response to the type of action the U.S. has undertaken.
Furthermore, our proposed tariffs are reasonable and proportionate to U.S. action. They won't come into effect until July 1, and there will be a consultation period during which affected businesses can lobby the Canadian government to remove items. The final list of items subject to tariffs will inevitably be smaller than those on notice, and the Canadian government is counting on the fact that few Canadians will put down their beers on Canada Day to see what ultimately made it on the list.
The most severe 25 per cent tariffs are to be levied only against the U.S. steel industry, while all remaining items will be subject to 10 per cent tariffs. Taken as a whole, the economic impact could be as large as $16.6 billion, as the prime minister and foreign affairs minister suggested last week, and there is no doubt that metal-using and producing industries will be badly impacted for a time. But the notion that Canadian consumers need to stockpile pickles lest they pay an extra 20 cents a jar seems rather overblown.
The July 1 deadline for introducing Canada's measures also gives Americans time to come to their senses, to lobby the president and repeal their own tariffs. Canada's list of retaliatory items targeting influential GOP interests is designed to pressure Republicans to appeal to the president to back down.
Canada rolled out this same strategy successfully with the Obama administration several years ago over U.S. Country of Origin Labelling legislation. In the face of Canadian threats to retaliate with $1 billion in tariffs on items reflecting key Congressional interests, President Barack Obama backed down from advancing a protectionist policy he never seemed to believe in anyway.
But the policy orientation in Congress has changed dramatically, and the likelihood that Trump will be influenced by either Congress or Canada now seems awfully low. As he outlined in his book The Art of the Deal nearly 30 years ago, Trump is unmoved by threats of economic ruin because he doesn't believe them and wouldn't expect his detractors to say anything else.
Canada's tariff plan will see the Trudeau government through June. But next steps are critical. As the much smaller economy and more dependent trading partner, self-restraint is essential.
We must remember that Canada's greatest leverage with the Americans has always been Americans themselves. Donald Trump may have started this, but no matter what action Canada takes, Justin Trudeau won't finish it. Americans will, one way or another. In the meantime, Canada must do its part to keep this trade dispute from escalating to a full-on trade war.