Trump's Tariffs
Upending global stability further, here is a view from Canada
Empires come and go. But over time they get smarter and America’s post-war global hegemony is a great example of one not based on territorial conquest, but on economic power backed up by an implicit military threat. For that to work it needs partnerships, coalitions and collaboration. For instance, the Marshall Plan that helped Europe back on its feet after the second world war was probably one of the smartest moves to build long lasting mutual beneficial partnerships, ensure stability and then wrap it all into a set of supporting trade and security mechanisms (like NATO). It was foundational to one of the most peaceful and prosperous times in world history and indeed it gave rise to unprecedented living and health standards globally. It took us all a level further.
So, it takes rare genius to decide to blow it up, in particular in a time when new and demonstrably less friendly empires (Russia, China) are ready to go on a territorial quest of sorts. By imposing tariffs on Canada, Mexico and China, Trump has upended not just plain economic logic (it will increase US inflation, sideline investors and unleash economic chaos everywhere) but also fractured relationships with America’s closest partners. One of the very core pillars on which American power was built. It is not only a self-defeating move; it will accelerate global instability at a time when the world needs exactly the opposite. Above all it replaces trust with distrust, so even if things are fixed and we can go back to normal relationships with Washington incredible damage will have been done.
And to be clear, there is zero logic to impose tariffs on your neighbours and cite fentanyl and immigration, total bogus claims, as the core reasons and then continue to argue that there is nothing to negotiate. Unless of course you have far darker motives and no one can discount that yet.
Yes, America runs trade deficits with other nations but these are not the sort of financial deficits like countries have in their budgets. They are only imbalances and the smartest thing you can do about it is to look at fixing or retooling your own economy if you think too much wealth is seeping out of your country. What is equally mind blowing is that Trump had, by merely putting out the tariff threat, alarmed and divided Canada to the point that an election following Trudeau’s farewell would likely return a conservative and very pro-America partner. Not so now. Canadians of all stripes are united all of sudden and no one can tell what the political outcome in Ottawa will be once an election is held later this year.
But for Canada the hard part will not be the just the economic mess and uncertainty that it is now faced with. Yes, it will have to craft a strong economic response but it will also have to learn to not complain and finger point, but get to work and develop a long-term plan. It will mean a major overhaul of its economy. This will consist of first and foremost to unleash its natural resources for oil to gas to minerals. With the world’s third largest oil reserves, Canada for instance has the potential to be one of the wealthiest petro-states in the world. At the same time it will have to finally take a stab at its archaic inner-provincial trade barriers, regulation and cut taxes across the board. Here in British Columbia mining has become next to impossible because of endless consultation processes. Canada has the natural resources, infrastructure and above all the brainpower to become an economic leader, but only if the political will is there. Yes there are environmental aspects and there will be a transition to greener economies over time, but it may take just a bit longer and in parallel Canadas has a very smart tech sector that can and will facilitate this uneasy journey. It will take time and effort though, but if Canada can unleash its real potential Americans will over time be begging to be part of it, again.
How it will all play out right now is hard to say and even smart economic minds have a hard time figuring out exactly the cost on both sides of the Canadian-US border as the relationship is so intricate. It may be part of the Trump mode to sow chaos in order to negotiate a few favourable items and then proclaim a win. Note that large chunks of the American economy will suffer, notably consumers, and that may still give the new occupants of the White House time for some pause. But the tone and determination with which Trump 2.0 is being rolled out on all fronts raises the likelihood that this is a structural move that seeks to redefine the way North America looks and operates.
Some will say, well what about the various treaties signed with America? Do they not give a level of protection and recourse? Well no. Treaties are like any other signed documents: they are based on trust and an institutional framework to support them. You can even go as far to argue that only trust makes them work as each party sticks to their part of the deal. As of today that trust is gone, completely.
Pieter - you must totally reject Stephen Punwasi’s argument regarding Canadian fentanyl superlabs - one of which had 95 million doses on hand. It seems logical you would also deny the existence of phenomenal money-laundering that Canada’s fentanyl manufacturing has allegedly produced - which many experts say is the source of real estate in affordability in major Canadian markets.
What is needed is an immediate election, since Trudeau will soon be gone, and a PM who actually has Canada’s interests at heart to negotiate. Trudeau has strangled Canada with globalism such as net zero. and has facilitated the rapidly growing influence of the Chinese Communist Party over Canada’s government, and resources.
Hysterical overreaction towards America is not called for., and is completely
misdirected.
Canada is a ship that is presently exhibiting a severe list, threatening to capsize. You seem sanguine about it.
Oh, I think all we are seeing is a political bashing maneuver such that Canada unites under the Liberal brand to fight a common enemy thereby putting Poilievre in line with Trump. It is sad that Trump, IMHO, at the root core, is reacting to the fall of our Canadian Dollar from being roughly at par with the US Dollar between 2007 - 2013 to what it is now. At the time we had a high Canadian Dollar because of our income derived from oil exports and Steven Harper’s fiscal policies. Then in 2015, Justin Trudeau and the Liberals got elected, with the intention to move away from a high income oil export type economy and towards an inflationary debt driven green economy all the while getting a back scratch from the central banks to hide any economic wrongs by further reducing interest rates. Then when interest rates could not fall any further (in Europe they had negative interest rates), a pandemic came out of the blue, so as to rationalize the need for more spending that was otherwise frowned upon. I feel Trump wants a Canadian Dollar at par with the US Dollar and that the Liberals have acted politically in such a way that they have driven the dollar down to 69 cents where it is now. Nobody talks about a 69 cent Canadian Dollar being effectively the equivalent of a 44% tariff on American goods imported into Canada. If one adds the HST/GST/PST to that, then that amount well in excess of 50%. It means that under todays Liberal government we are paying 50% more for American goods that we did under Steven Harper. People are laughing at the Liberal solution to engage in a tariff war causing this current 50% figure to double such that we could almost cut off trade entirely with the United States causing our economy to spiral downwards. This crazy tariff war could echo a historic precedence everyone which is silent on, namely US President Benjamin Harrison and the McKinley Tariffs of 1890, which lead up to the 1893 overthrow of the Hawaiian Monarchy by the Citizens Committee of Public Safety due to the unemployment which the Tariffs created. We clearly lack leadership in Canada as we clearly have little knowledge of history.
Furthermore, in light of the fact that our Canadian Leaders likely own American securities whereby there is a strong personal motive to devalue our Canadian dollar and in so doing receive 44% greater return on those investments all the while hurting Canadians having to compete with Americans by giving them a 44% discount wanting to buy homes in Whistler and the Sea to Sky region. Trump’s Tariffs at 25% are nothing when compared to the 44% discounts Americans get (when compared with 2007-2013 exchange rates) when paying for Canadian products. Trudeau and the Liberals have just put Canada in a precarious situation due to unfair play.
Trump, IMHO, seems to be echoing Brian Mulroney’s election campaign of 1984 and 1988 whereby our Prime Minister initially wanted to eliminate our income tax system entirely through tax reform which was subsequently watered down due to the opposition to become the GST/HST at much lower but more agreeable rates. I see this Tariff thing evolving to a North American wide Value Added Tax or VAT just like they have in Europe. The VAT in Europe varies between 15% and 27% depending which country the trade is with. It is interesting that Canada is currently looking towards a Comprehensive Economic Trade Agreement (CETA) with Europe, meaning that there exists a tax on Canadian exports of up to 27%, whereas Trumps Tariffs are only 25%.
So again, I see our Liberal and NDP leaders oversimplifying this in an attempt to push the Conservatives in an anti-patriotic pro-Trump stance. Political Chess play, that is all.