The US administration is using a tariff on steel and aluminum imported from Canada, Mexico and the EU. They had threatened to do that before in March, but exempted Canada and Mexico during that round (notably Prime Minister Justin Trudeau took “credit” for this). Now the tariffs are in place, effective yesterday.
Presumably this is part of a negotiation concerning NAFTA which hasn’t gotten the results the US administration wants.
Canada’s response is here, which they claim to consist of CAD$16.6 billion that the USA will levy against Canadians.
Included is not only steel and aluminum, but other household products. This includes yogurt, roasted coffee (although not decaffeinated!), strawberry jam, non-frozen orange juice… in other words, my breakfast is going to get 10% more expensive!
Here’s the big problem with the “tit-for-tat” strategy that Canada is employing: The USA has a lot more money than Canada does. If the USA decides to raise the stakes and put on another $50 billion in tariffs, what US imports are Canada going to go after next?
It’s pretty clear where this end-game is going to go – the purchasing power of the Canadian dollar will drop.
My other comment is that Ontario is the most sensitive province to steel and aluminum import tariffs. They are also undergoing a provincial election at the moment which has a strong possibility of a minority government (which means paralysis). Finally, Ontario is 40% of Canada’s GDP, so the US tariffs hit the correct part if the USA wanted to make some political impact. They clearly know what they’re doing.
“They clearly know what they’re doing.”
AHAHAHAHAHAHAHAHAHAHAHA!!! Thanks Sacha, I needed a good laugh. You realize it’s the Trump team (minus Gary Cohn) we’re talking about here, right? If anyone behind this actually has a plan, it’s Putin and the plan is to break up every economic and military alliance to which the USA belongs.
I do actually enjoy this blog by the way. Don’t get me wrong.
You might not put Trump in the “they clearly know what they’re doing” category, but in relation to Trudeau here in Canada, I think it’s no contest – we have less of a clue than they do. Did you know it takes an environmental assessment in Canada for me to fold a piece of paper into an airplane?
No – I’m an American as you might have guessed. But NAFTA predates Justin by decades.
Trump told a gathering of conservatives recently that he literally made up some of the trade figures he mentioned in a meeting with Trudeau. I have to wonder how strong Trump’s argument is (that NAFTA favors Canada over the US) if he has to make up shit. Or maybe Trump is so accustomed to lying that he can’t help himself.
Anyway, we can all look forward to a trade war with each country’s largest trading partner.
I’m sure the argument (NAFTA favouring Canada over the US) is pure hogwash, but I’m surprised why people find politicians lying to be news. Obama, Bush, Clinton, etc., you name it.
From a rational perspective (and something that is Trump’s trademark in office is to give off the appearance of being irrational) everything they are doing on this file seems correct. They are pandering to their political constituencies (specifically the rust belt that represented the reason why Trump won the electoral college) fully knowing their competitor (Canada) is facing an election sooner than he is, plus knowing that we can’t even tie our own shoelaces without having to go through endless rounds of consultations in case if we offended any special victim interest groups.
Interesting points … I wasn’t aware of the election timing. But I suspect that US rust-belt voters will recognize that Trump is ultimately responsible for any retaliatory tariffs by Canada.
All politicians lie, but Trump takes it to an entirely different level. Orders of magnitude higher in terms of frequency, and a lot of it is indisputably false as opposed to shades of grey.
Retaliatory tariffs that structured in its current form probably won’t amount to anything that people will directly see – the political impact is going to far far less in the US than it will be in Canada, which is why I think what the US is doing is quite rational.
If you’re an exporter of Strawberry Jam to Canada, however, you have my condolences.
As for the lying… as sad as it is to say, I think people are used to seeing politicians lie and the track record seems to provide Trump with inherent immunity in anything that he says, so it is probably just best to watch what actually happens (e.g. in this case the tariffs themselves) rather than the cited motivations.
Canadian exports to US = 25% of GDP while US exports to Canada = 2% of GDP
how does Trudeau think he’s going to win an escalating battle?
Let’s agree to disagree on the lying. A recent poll found that 13% of Americans don’t think they can trust what he says. You can adjust that anyway you like and it’s still an incredibly low number.
As for what Trudeau is thinking- he didn’t start this, so why assume he believes Canada can “win an escalating battle”?
“A recent poll found that 13% of Americans don’t think they can trust what he says.”
I find this difficult to believe. I would assume that most Democrats would agree with this statement and thus it would be a lot larger than 13%. Even a good chunk of Republicans would believe this, knowing that’s how politics works. I think the core of the argument here is not the lying but rather the reasons for it.
“As for what Trudeau is thinking- he didn’t start this, so why assume he believes Canada can “win an escalating battle”?”
Whether he’s delusional (i.e. he actually believes what he is saying) or whether he is intentionally lying doesn’t make much difference here – he’s wrong if he thinks Canada will win in a “dollar for dollar” trade battle with the USA. Maybe he thinks Canada can import orange juice from Greenland.
Destructive trade wars (and things of that nature) happen when each side believes the other will behave rationally, which in turn frees each side to behave irrationally. The US has every reason to believe Canada will behave rationally, for the reasons you imply: basically, that something is better than nothing. I still think that’s the likeliest outcome. But politics, and a perceived US preference for irrationality, may still drive Canada to some foolishness.
In terms of impact, it’s not just what the aggregate effect is as the concentration of that effect. If I were Trudeau, I’d be looking at the Gulf complex’s reliance on Canadian heavy crude, and–assuming it’s high enough, with Venezuelan and Mexican production declines–ways I could disrupt/tax supply to make the complex less economic. The threat of heavy industrial losses in deep Trump country might be appealing as a negotiating tactic.
I also think it would be nuts! But sometimes people take risks which really, really don’t pay off.
why don’t we consider conceding that our protected dairy and egg boards etc are incorrect policies?
if we’re imagining we can threaten trump through some clever tactical tariffs and expect that his threats will crumble, then why do we not consider crumbling no matter what? human nature does not work like that
their demand for 5 year renewals is impossible, but so is our demand to include gender protections. the only way forward that isn’t destructive to little canada is through thoughtful cooperation not escalating attacks
ok – I can’t find the 13% poll – maybe my memory is off. But he’s another poll: http://thehill.com/homenews/administration/385779-nearly-two-thirds-of-americans-say-trump-is-dishonest-poll
This is a staggeringly high % given that there’s about 1/3 of Americans on either side of the political spectrum who side with the President no matter what. And also considering how many Republican who only get their news from right-wing media, which has devolved into Kremlin propaganda at this point.
“According to the NBC News/SurveyMoney poll, 94 percent of Democrats and 76 percent of independents believe that Trump tells the the truth only occasionally or even less frequently.
Republicans, on the other hand, overwhelmingly view Trump as a consistent truth-teller. Seventy-six percent said that he tells the truth either all or most of the time, while 22 percent believe that he tells the truth only some of the time or less.”
This sounds much more reasonable than the 13% in the previous comment. But flip the parties over and see what they would have said about Obama, and I think you would have gotten roughly the same results. Flip them again with Bush, Clinton, etc. The fundamental nature of media itself has changed significantly since Clinton, however.
http://www.cbc.ca/news/politics/steel-tariff-maple-syrup-toilet-paper-1.4686833
– About the geographical distribution of Canada’s proposed tariffs. When you’re a mosquito, you want to bite where you can draw out the easiest blood from your victim but hope to not get smashed when they try to swat you…
… and those numbers back up what I said in my last post. Yes, there is less trust in US politics these days, but even still, the public’s trust in Trump is really low.
“flip the parties over and see what they would have said about Obama, and I think you would have gotten roughly the same results. ”
Bullshit. I challenge you to find a poll from any reasonable source to back up that claim.
Nope, no polls on Obama, he had different themes that Republicans tried to pick on (e.g. birth certificate, religious affiliations, etc.). Trump’s opponents current attack vector right now is that he’s a liar and in collusion with the Russians.
As fun as it is to talk about the partisan issues of both sides, getting back to the trade issue and its impact on Canadian markets, escalation seems to be a likely outcome until at least the congressional elections are done.