Will Canada escape President Donald Trump’s potentially economy-destroying tariffs? Even if you can’t answer that question, congratulations. you are in good company.
It’s a multibillion-dollar mystery in the minds of some of the most connected people in North America’s capital.
President Trump is threatening to impose a 25% tariff on all products imported from Canada and Mexico unless they make undefined changes at the border to slow the flow of immigrants and fentanyl.
There is a widespread belief that President Trump is hoping to extract concessions to get his presidency off to a strong start.
The unknown: What numbers, goals, or actions could satisfy him and avert a possible recession and trade war?
Even those who know Trump, trade and Canada well, from those who worked in President Trump’s first White House to those advising the Canadian government, have expressed their own embarrassment. I’m confessing.
“The problem is that Canada doesn’t have a clear understanding of what Team Trump really wants. What do they want fixed on the border?” Canada-U.S. trade consultant Eric Miller told CBC told the news. “What is your definition of success?”
Prime Minister Justin Trudeau calls Trump to explain the ‘facts’ about Canada-US relations after US President-elect Donald Trump threatens to impose 25% tariffs on all goods from Canada and Mexico He said he did. Prime Minister Trudeau also contacted Ontario Premier Doug Ford and said his first cabinet meeting will be held this week.
The U.S. president-elect did not provide further details in a phone call with Prime Minister Justin Trudeau on Monday night. Officials said the call started with a few minutes of friendly banter.
Later, when they brought up potential irritants, Trump repeated the threat he posted on social media. Prime Minister Trudeau suggested Canada’s situation is not as dire as Mexico’s, citing what Canada has already done at the border.
What is already abundantly clear here is that the old adage that national security equals economic security is truer than ever. The US is threatening to squeeze wallets to strengthen its own security.
To stay within the U.S. trade tent, many officials say this means seriously addressing U.S. concerns about borders, defense spending, supply chain security and more.
President Trump demonstrated this pattern in his first term by threatening to impose tariffs on Mexico unless it controls immigration. Even high-ranking officials in Trump’s first term recently proposed Canada deserves economic punishment if it does not increase defense spending.
Now, border security is once again at the center of President Trump’s threats on trade. A top White House trade official from the first Trump administration said this represented a major change.
“Trade used to be discussed behind closed doors in Geneva, but that is no longer the case. Trade used to take place on its own lane, but these lanes have become increasingly blurred over the last eight to 10 years. Everett Eisenstat said. is a trade expert who served as deputy director of the White House National Economic Council during President Trump’s first term.
“Part of it is President Trump, and part of it is the nature of the global economy.”
Eissenstat said President Trump truly believes in tariffs and believes in using them to accomplish goals that others may see as irrelevant.
There is no ‘urgency’ in Ottawa.
Meanwhile, the Biden administration has taken a carrot rather than a stick approach to making progress on some issues.
Behind-the-scenes pressure was placed on Canada to tighten its rules. Mexico travel rulesa successful lobbying effort Increase in defense spendingand actually gave money to canada After Ottawa shifted its approach to critical minerals. Canada has made concessions on plans to allow Chinese state-owned companies to buy minerals used in electronics and industry. weapons.
The United States currently spends its own tax dollars through special policies. military fundshelp you jumpstart some Canadian Minerals Project.
“There was no need to wait for America.” [defence spending] We need to move those projects forward,” said Heather Exner-Pilot, energy and security advisor at the Business Council of Canada.
“There’s no sense of urgency” [in Ottawa]. ”
Business lobby groups argue that: new report To more urgently increase Canada’s military strength and mineral production.
Trump’s re-election may be adding to the sense of urgency. But Canada is starting to see a long-term trend, said Miller, a Canadian based in Washington who advises governments and businesses in both countries.
it is growing anxiety neighboring superpower. It is an anxiety caused, in part, by a sense of being economically and militarily inferior to a new and more powerful adversary, China.
But as comments from Trump and his allies demonstrate, America’s security concerns begin at the nation’s land borders, where millions of people have crossed illegally. Hundreds of people on terrorist watch list Stopped while crossing.
“Canada needs to recalibrate its thinking to a world where the United States feels vulnerable and where we don’t always treat our allies in the cooperative spirit we would like,” Miller said. .
So what is Trump ultimately going to do?
Canada is taking great advantage of this result. According to various estimates, President Trump’s tariffs, if fully implemented, could knock several points off the Canadian economy.
According to Professor Andreas Schotter, Canada’s GDP will contract by 2.4%, prompting companies to move production to the United States, causing a weaker dollar, fueling inflation and potentially requiring emergency interest rate cuts. He said the dollar and inflation would worsen further. at Western University’s Ivy Business School in London, Ontario.
Eisenstat, a former Trump administration official, says this could go either way.
“It’s wise to assume the worst and prepare for the worst, but also be prepared to strive for a better outcome,” he said.
“These threats are real. They are a manifestation of broader trade trends and need to be taken seriously.”
If anyone can negotiate an exemption, Miller says, it’s Canada.
If President Trump actually wants a deal, he says, he needs to get one. This is because the Canadian border issue is relatively minor and does not justify the cross-border economic damage caused by tariffs on Canadian oil, automobiles, and food.
“But I don’t think we’ll ever get to a decent place,” Miller said. “Some people say, ‘He’s negotiating. It’s all attitude.’ But I personally think he’s a guy who’s willing to get this done.”
And what if Trump does it? Lawsuits by U.S. companies, trade challenges by Canada and Mexico under CUSMA, and talk of retaliatory tariffs risk further economic damage.
Miller said President Trump could announce additional tariffs on the first day, Jan. 20, but after that, it could take time for them to be applied at the border, during which negotiations would continue. That’s what it means.
But the broader story is the end of an era that goes back to the North American Trade Agreement, and perhaps even earlier, to the 1965 Canada-U.S. Automobile Free Trade Agreement.
“We’re talking about reshaping the way we’ve run our economy and traded for the past 30 years,” he said. ”[If this happens] In effect, USMCA, or CUSMA, is complete. ”
