Be honest now: did you really think that Donald Trump was going to play by the rules on trade and NAFTA? If so, you've got quite a lot of company in Canada, particularly on the left of the political spectrum. Trade union economists and a good segment of the media were never big fans of the NAFTA deal to begin with, and not without good reason, given the havoc it created in Canada's manufacturing sector. Many of them have viewed the possible collapse of the pact with equanimity, noting that the US tariffs that would come back into effect in a post-NAFTA world would be generally in the range of 2.5 percent -- regrettable, but entirely manageable.
So much for that. Trump and his uber-geriatric Commerce Secretary, Wilbur Ross, have come up with the idea of levying much higher tariffs on the grounds of "national security", starting with 25 percent levies on steel and 10 percent on aluminum. The targets of the tariffs, which include the EU and Mexico as well as Canada, are righteously angry. In Canada's case the anger is partly based on the "national security" ruse, which Prime Minister Justin Trudeau has portrayed as "insulting", given the past history of the US and Canada fighting wars together. (Trudeau refrained from pointing out that Canada entered both World Wars years ahead of the US).
A further source for Trudeau's anger is that the US actually runs a trade surplus in steel with Canada, making it a very strange starting point for a trade war. In any event, the Canadian government has responded with tit-for-tat tariffs of its own on a wide range of US products, including steel and (who knew?) maple syrup.
I haven't actually read Trump's "Art of the Deal". I don't think this places me at any disadvantage in understanding his thinking, since he didn't actually write it. It seems clear, though, that Trump sees his unpredictability as his key advantage in negotiations -- just ask Kim Jong-Un. That unpredictability, however, is tactical rather than strategic. One of the things that has to be recognized about Trump is that what he does largely reflects what he says. During the election campaign he promised to do all manner of bizarre and reckless things, which the media (and the Republican Party) dismissed as so much hot air. It's now very clear that he meant every word, and as the second year of his term rolls on, he seems to be coming more emboldened by the day.
Media commentators in Canada in the last day or two have noted that Canada is the "junior partner" in the trade deal with the US. Some have argued that this means that retaliating against Trump's tariffs, as the Trudeau government has done, will simply invite still more retaliation from Washington. Responding to bullying by just sitting back and taking it is not a tactic that often seems to work.
In any case, there's no reason to think Trump will wait for an invitation. Today he has tweeted about Canada's restrictive practices in agricultural trade, an issue that came up during the election campaign. It has to be said that Trump is on much firmer ground here than he is with steel. The arcane "supply management" system in the Canadian dairy sector is one of the most egregious examples of "producer capture" to be found anywhere in the developed world, as anyone buying overpriced milk or eggs in Canada can attest.
Breaking up that system would be a big favour to Canadian consumers, but that aside, it's hard to see any upside to what looks more and more like a nasty trade war, the US against everybody. And we know from history how that's likely to end.
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