I’m conflicted about the trade war that the U.S. has started with Canada. Let’s be clear: any representation that Canada has been taking unfair advantage of the U.S. or that they have been treating us badly for years is a bogus characterization. In reality, the shoe is on the other foot. It’s the U.S. that has been behaving badly. For decades prior to the Trump era, for the most part, trade between Canada and the U.S. has been by mutual agreement with mutual benefit. All that changed when, in his first term, Trump disparaged and then effectively walked away from the North American Free Trade Agreement (NAFTA).
The intent of NAFTA was to create a free-trade area — where the U.S., Canada, and Mexico eliminated tariffs on most of the goods that they traded with each other. And while NAFTA has been criticized for fostering dislocations in manufacturing sectors, it had been credited with lowering costs on both sides of the border. NAFTA was replaced by the Canada-U.S.-Mexico Agreement (CUSMA) in 2020, during Trump’s first term. This agreement preserved the regime of tariff-free trading, except for goods relating to national security. Interestingly, the new tariffs weren’t justified under that national security exemption. Rather, Trump used the excuse of responding to “Canada’s discriminatory treatment of American products” under the authority of Section 338 of the Trade Expansion Act of 1962 as the justification for imposing a 50 percent tariff on an array of Canadian goods.
As I read the White House’s press release on these new tariffs, the criticisms of Canada stem from our own making. The release charges Canada with contracting more favorable trade agreements with other trading partners than it has with the U.S. Whose fault is that? Trump is bemoaning the fact that Canada had reacted to earlier imposed tariffs that the U.S. had initiated by seeking other, more favorable outlets for Canadian products. Who could blame them given the belligerence of the U.S? Additionally, the White House release took umbrage about the fact that Canadian imports of U.S. liquor have fallen sharply. That, too, was a reaction to Trump’s initial tariffs that have since been deemed to have been unconstitutional by the Supreme Court earlier this year.
In any case, this new round of tariffs is escalating the problem rather than ameliorating it. Here’s a list of the items subject to this new 50 percent tariff: motor vehicles, alcoholic beverages, dairy products, plywood, cement, furniture, clothing, seeds, fishing rods, hockey sticks, swimming pools, and wigs. This is a fight that doesn’t need to happen. Rather than upping the ante, the U.S. objective should have been to broadly lower tariffs, not to raise them.
It’s hard to know what Trump is thinking. The new tariffs clearly make the above Canadian goods more expensive to Americans, and while that’s certainly going to inhibit the sales of affected goods, it’s the Americans who bear the higher costs. Why would he want to make Americans pay higher prices and at the same time inflict harm on the economy of a trusted ally? Who’s feeding him the line that, somehow, the U.S. suffered under a tariff-free policy? It’s frightening to me that he seems to be operating under a delusion and perhaps more disturbing, none of his advisors are willing to speak truth to power and advise him against such an irresponsible and destructive policy. The only acceptable input for Trump appears to be, “Yes, dear leader.”
I’m supportive of Canadian Prime Minister Mark Carney’s decision to extricate Canada from the pretense of trade negotiations, where it seemed that Trump’s primary objective was to humiliate, intimidate, and ultimately subjugate his country. I cheered when Mark Carney stood up to Trump and called him and his lackeys out for trying to impose unfair and inappropriate conditions on Canada. Good for him. Carney’s judgment that the U.S. can no longer be counted on as a reliable ally or counterparty has been evident for quite some time now. Carney’s just the first to say it out loud. The emperor has no clothes. Everyone knows. And yet his MAGA collaborators seem fine letting Trump run around naked, as he sabotages the world order. The U.S. is the bad guy in these negotiations, and we’re already starting to get our comeuppance.
I said I’m conflicted about the current situation because, while I appreciate Canada’s clear-eyed repudiation of Trump’s bullying efforts, I’m not so sure that they’re on the right track by responding to these new tariffs with dollar-for-dollar retaliatory tariffs, as they’ve said they would. I understand the impulse to punish the U.S. for creating this mess, but retaliatory tariffs may hurt Canadians more than their U.S. counterparties. I’d hate to see that. Americans are already suffering from the ill-will that Trump has precipitated independent of these latest tariffs. It started in connection with reduced tourism by Canadians and boycotts of American alcoholic beverages precipitated by the first round of tariffs, and these newest tariffs are only going make things worse. That response may be sufficient without exposing Canadians to the prospect of having to pay higher prices for imported good when their reciprocal tariffs are put in place.
The high road for Canada might be to hold tight to the principles of free trade, all the while seeking to expand their trading activities to a broader audience of non-U.S. counterparties. That orientation seems inevitable. Ultimately, the U.S. will bear the economic and diplomatic cost of its own hubris; Canada need not compound the damage by imposing tariffs that would fall hardest on its own consumers.
Be the first to comment