Photo by Walter Martin for Unsplash+
So a bit early – here we are with this week’s Substack Post from Alan’s Newsletter. But the demands of a medical procedure take primacy this week – and for a while afterword.
Nevertheless, how could I not contemplate the current back and forth trade blasts between Trump and Carney. We start with the latest Canadian tariff retaliation after the imposition of new Trump tariffs. The tariffs imposed by Canada are described by Tony Romm in the following NYTimes piece:
“New Canadian tariffs targeting roughly $20 billion in U.S. imports officially snapped into place on Tuesday, the latest escalation in an increasingly costly trade war that has ensnarled two longtime allies.”
“The duties apply to a variety of U.S. goods, including clothing, cheese, metal parts and wood products. The approach is meant to mimic the taxes that President Trump imposed on Canada after trade talks between the two neighbors collapsed in acrimony last month.”
“For now, the economic effects of the tit-for-tat may be limited because the tariffs encompass only a small portion of the annual trade between the United States and Canada. The more pressing concern is a potential cycle of retaliation, one that results in even higher and more exhaustive duties that harm families and businesses on both sides of the border.”
Not surprisingly, President Trump responded loudly and with further damaging trade action against Canada:
“Then, hours before Canada’s new tariffs took effect, Mr. Trump took to social media to continue his attack. He singled out Bombardier, a Canadian plane manufacturer, claiming there would be “NO MORE SELLING BOMBARDIER IN THE UNITED STATES!””
“The spat with Canada offered the latest evidence that Mr. Trump remains as committed as ever to his disruptive strategy of trade brinkmanship. Despite nearly two years of blistering court defeats, vicious international disputes and mounting domestic blowback, tariffs remain the president’s preferred tool to try to boost domestic manufacturing and broker better trade deals.”
And then further Trump actions were constructed to be ready to respond to Canada:
“While he spars with Canada, Mr. Trump and his aides are also putting the final touches on a roster of new tariffs targeting dozens of additional countries that the administration has accused of engaging in unfair trade practices. The latest round is expected to find that other nations overproduced certain products — what the administration has called “excess capacity” — leading to large and persistent U.S. trade deficits with those nations.”
“Further inflaming tensions, Mr. Trump has even threatened to block all trade involving countries that export more to the United States than they import from it. Currently, the United States has a yawning trade deficit in goods and services involving dozens of trading partners, including many in Europe and Asia. A halt to imports could prove economically cataclysmic.”
Prime Minister Carney it appears to be – at least for the moment – the one ally ready to push back on Trump’s questionable, possibly illegal, tariff moves. As set out by Ian Austen, again at the NYTimes:
“Mr. Carney’s response has distinguished him as one of the few world leaders standing up to Mr. Trump as he lashes out at American allies on a range of issues.”
“The new measures will double the rate of existing tariffs that Canadian businesses pay on imported American steel and aluminum products and affect about 700 products, including aluminum foil, railway locomotives and steel bridges.”
“But there is also concern over what might happen next. Mr. Trump has repeatedly threatened another round of American tariffs if Canada follows through on its plan.
The Carney government has targeted carefully, so it has been argued the tariffs it has imposed. Again Ian Austen:
“Many of the American items that will soon face Canadian tariffs of 15, 25 or 50 percent mirror the Canadian exports that now face 50 percent American tariffs, particularly clothing and wood products. Canada revised the list to remove dozens of fish products after the Canadian fishing industry said that tight cross-border integration meant its members would also be harmed.”
“Canadian officials have suggested that many of the targeted American items come from states where voters supported Mr. Trump, though some political analysts question how much pressure that will actually put on the White House. The list also includes items with little significance for the Canadian economy, including the metal bands that attach erasers to pencils, migratory bird identification bands and fish egg incubators.”
The Trump response to Canadian retaliation was not long in coming. Overnight Trump acted again. As set out by Mark Rendell, Adrian Morrow, Nathan VanderKlippe in the Globe and Mail:
“U.S. President Donald Trump has issued a sweeping ban on imports of Canadian alcohol, motorcycles and some dairy products as Washington ratchets up pressure in response to Ottawa’s latest counter tariffs.”
“On Tuesday, Mr. Trump signed an order stopping the import of a broad range of alcoholic beverages, including beer sold in cans and bottles, rye whisky and many types of wine. He issued separate orders banning the import of whey protein, molasses and motorcycles.”
“The measures, which are scheduled to take effect on Sept. 29, followed Canada’s decision on Tuesday to proceed with tariffs on $28-billion worth of U.S. products. Ottawa’s levies were “dollar-for-dollar” retaliation for a new round of U.S. tariffs that hit Canadian products last month.”
How does the Canadian government assess current Trump actions? I suspect this description in the Globe and Mail piece by Marieke Walsh, Sophia Bertuzzi, from political consultant, Eric Miller is probably not far off the mark:
“For Mr. Trump, this is a test of his ability to bring Canada to heel and subjugate the country to the whims of the White House, Mr. Miller [Eric Miller is part of Rideau Potomac Strategy Group] said. For the Prime Minister, it’s a test of whether he, and in turn Canada, can withstand the economic pressure from a superpower and hold its own.”
So, then, how does this conflict get resolved in the face of Trump’s actions to punish Canada and Canada’s unwillingness to accept Trump tariff actions without a response? For one there is a serious effort on the part of the Carney government to diversify trade and to join, where possible, various free and near-free trade arrangements. As recently reported in Bloomberg:
“The European Union and Canada are working toward a new, all-encompassing relationship that will range from trade to security, as the transatlantic partners seek to build a new alliance to offset the global power politics dominated by China and the US.”
But let’s be clear, these kind of efforts take time and for the Canadian economy ‘tempus fugit’. The Trump actions will cause damage; folks will lose their jobs; and small and medium-sized businesses are likely to close in the face of such bans.
Meanwhile, what should be attended to right now, and could provide more and earlier relief to Canadians is a concerted serious effort to dismantle interprovincial barriers and to gin up dramatically interprovincial trade, investment and finance throughout the country.
It is not the final answer but it could give the Canadian economy some “breathing room” to get out into the global economy much more firmly. Take care of your home and then go abroad. Then, hopefully, return to work out relations soon with Trump, if possible, and after Trump if not.
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