I love Canada, am a Canadian (and American) citizen, have Canadian loved-ones. I don’t want to see Canadians hurt.
It’s true, however, that, in the artificial universe of trade agreements, previous US leaders have shown they don’t care about US workers. Trump’s the opposite. He’s using American power to muscle deals he believes are beneficial to American workers.
Canada taxes purchases of American goods starting at $20, whereas America starts taxing Canadian goods at $1000. Trump has said he’d love for trade to be entirely and mutually without tariffs:
“No tariffs, no barriers. That’s the way it should be. And no subsidies. I even said, ‘no tariffs’,” the US president said, describing his meetings with fellow Group of Seven leaders as positive “on the need to have fair and reciprocal trade”. “The United States has been taken advantage of for decades and decades,” he continued, describing America as a “piggy bank that everyone keeps robbing.”
But since that’s not going to happen …
“Canada is going to have to make some concessions,” says Laura Dawson, head of the Canada Institute at the Woodrow Wilson Centre in Washington, DC. Among them might be raising the threshold at which Canada taxes purchases of American goods from C$20 to around C$1,000, the American level. Canada might consent to more onerous conditions for a vehicle to be imported duty-free within NAFTA, including on wages and the amount of North American content.
And of course, the American market is enormous. Trump knows it. Leaders before him no doubt knew the power of American markets but refused to use it:
Canada gamely argues that the United States would also be hurt in a trade war. Canada is the biggest destination for exports from 36 of the 50 American states. Bilateral trade in goods and services is immense: $674bn in 2017. It is also, despite what Mr Trump says, balanced. In 2017 the United States had a small surplus with Canada, of $8.4bn. Yet Mr Trudeau’s bargaining position is weak. “We absolutely need them, but they could live without us,” says Philip Cross, an economist.
Canada’s system of supply management, which sets limits on the production of dairy, poultry and eggs, has long irritated the United States (and should anger Canadians, who pay more for food than they need to). Canada subjects imports of those products beyond a ceiling to punishing tariffs (298% in the case of butter). Mr Trump has been angry about this since he met dairy farmers from Wisconsin in April 2017.
The article is “Canada: Breaking a few eggs: The economy is already feeling the effects of Donald Trump’s trade war,” courtesy of The Economist.