No Trade Deal for Canada
Canadian Prime Minister Mark Carney ran on a platform of getting a ‘fair’ trade deal for Canada, standing up to Trump and essentially portraying himself as Trump’s greatest rival. The Canadian Media have been falling all over themselves telling Canadians that Carney would easily get a deal and best President Trump. As of Saturday, that has not happened.
Trump told Canadians that he would impose a 50% tariff on a long list of Canadian products, including dairy, honey, certain automotive parts, furniture and wood products and…hockey equipment. It has long been a joke in Canada that Canada maintains a massive lead in Zamboni technology.
All joking aside, what does this mean for the Canada-US trade relationship? Quite a lot. Dairy products have long been an area in which the Canadian government provides massive tariffs against American products to protect the dairy industry in Quebec and, to a lesser extent Ontario. Most Canadians who live on the border with the US have a long history of buying milk and other dairy products in the US for the simple reason that they are cheaper. People farther from the border are stuck with the higher prices. This will cause severe problems for dairy producers in Quebec and Ontario, along with job losses.
In terms of lumber, there is a long and complicated trade dispute surrounding fees, crown land and whether Canadian industry is undercutting US producers. There is enough gray areas and differences in how the two countries manage the logging industry that an argument could be made either that the Canadian practices are unfair, or that American practices are. I’ll leave that to the international trade experts. With the caveat that even they can’t agree. Again, Canadian lumber and products are a huge export for Canada, but may not be anymore. More potential job losses.
Previously Trump also imposed tariffs on Canadian steel and aluminum, which is another area that will cause pain for Canadian producers. The same with many auto parts. While some auto materials are exempt, others are not and this could cause a lot of layoffs in Southern Ontario where many of the Canadian auto plants are based. Closed plants and thousands out of work are never a good look for politicians.
One area that I would note that Trump is NOT imposing tariffs is an important one. Oil, gas and energy (electricity). I think the reason is that Trump is very much in favour of increasing oil and gas production in both the US and Canada, while Carney and the Liberals are, at best, ambivalent. Justin Trudeau was dead set against any further expansion of oil and gas production.
So, why did Canada not get an agreement to avoid tariffs? There are several reasons. To start with, as I have said, Carney has portrayed himself as Trump’s rival, and the Liberals are very much on board with this portrayal. Since Trump came into office, the Liberals have wrapped themselves up in the Canadian flag and claimed that they are great patriots. This despite the fact that when Trudeau was in office, they called the Canadian flag a symbol of hate, division and colonialism and claimed Canada was a “Post National Nation”. Whatever that is supposed to mean. Put simply, the Liberals have made it clear that they are Trump’s enemies, and are now very surprised and upset that he has begun treating them that way. This is not the way that other US President’s have behaved in the past. Even George W. Bush was…quite indulgent of this attitude.
Second, I think Trump has run out of patience with Canadian attitudes and behaviour. Which means for him there really isn’t a downside of imposing tariffs. From my own reading, I do see a change in attitude among many Americans towards Canada and Canadians.
Carney, I think, has decided that he can simply wait Trump out. Put simply, Trump will be out of office in two and a half years (despite the claims on the left that he will make himself a dictator for life). Should the Republicans lose heavily in the midterms in November, Carney may only have to hold out a few more months. He is betting that someone more “reasonable” will be in office shortly. What he has not considered is what to do if that does not happen, or if Trump’s successor is also a Republican and….not as friendly to Canada. In that situation, there is a long term threat to Canadian stability and the Canadian economy. And no one has said that these are the only tariffs Trump will impose.
There is another factor to consider. While the trade talks have been big news in Canada (front page news pretty much every day) until a trade deal wasn’t reached, it really wasn’t a very big deal in the US. The tariffs are on about $20 billion in Canadian products and affect somewhere between 5 and 10% of Canadian trade to the US. Which is 80% of the Canadian economy. So, this is 10% to 20% of that trade. Carney has announced he will match those tariffs. The problem for Canada is that while trade with the US is 80% of all Canadian trade, for the US trade with Canada is only around 10%. And reciprocal tariffs will affect far less than that. Maybe only 2% or so. The US can accept that loss. Canada cannot.
So, why didn’t Carney make a deal? The last reason. While the trade talks were underway, there was a poll in Canada. That poll (apparently) stated that if Carney got a trade deal with Trump, Canadians wanted an election on the deal. Try to imagine the Liberals, and Carney, running an election stating that Canadians should accept a trade deal with the person they have spent the last decade portraying as a huge threat to Canada. They wouldn’t do it. They wouldn’t even accept the pressure to run an election on such a platform. Canadian premiers (with the exception of Alberta) have made great hay out of removing US booze from Canadian shelves and refusing to put it back on even if there was a trade deal. The so called “Laurentian Elite”, those that most people are convinced really run Canada have made it clear that they are completely opposed to the deal.
Put simply, Caney refused a trade deal because a trade deal with Trump would have destroyed him and too many others politically. Carney would rather stay in power while destroying the Canadian economy and calling it “Patriotism”.
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