Canada’s “elbows-up” approach to American tariffs has been unique among market-based economies.
asserted
approach → base → economies
What have the EU, Japan, South Korea, U.K. and especially Mexico done differently and what lessons might we learn from them?
uncertain
we → do → them
Mexico has recently announced it wants to complete trade negotiations with the U.S. before the November midterms.
asserted
it → announce → midterms
That would leave Canada as a jilted bride.
asserted
That → leave → bride
The prime minister and the country obviously had a difficult hand to play in dealing with President Donald Trump — erratic, unreliable, crude and rude — and his clear desire to make Canada the 51st state rightfully angered Canadians.
asserted
Canada → have → Canadians
But the strategy of going along with the U.S. on border security and defence but being “elbows up” with retaliatory tariffs, boycotts of liquor and travel to the U.S., and overtures to China has escalated the conflict.
asserted
strategy → go → conflict
In the most recent negotiations, Canada could have simply explained why the deal the Americans were offering was unacceptable and expressed a willingness to continue negotiations.
uncertain
Americans → explain → negotiations
Instead, we unilaterally ended the negotiations and declared a trade war with the U.S.
asserted
we → end → U.S.
Canada’s position, heavily influenced by experience with the past CUSMA negotiations, has been “no deal is better than a bad deal,” with the implicit assumption that a better deal could be reached by delaying until there is a change in leadership in the United States.
The delaying tactic of refusing to renegotiate CUSMA until the current American tariffs are addressed has clearly failed.
uncertain
tariffs → influence → CUSMA
It has led to a further round of American tariffs and produced a rift with Mexico, which has been clear and consistent on its intent to negotiate and sign a trade deal with the United States.
asserted
which → lead → States
The other dimension of Canada’s strategy has been to diversify its trade and encourage more investment in Canada.
asserted
dimension → diversify → Canada
Diversification makes sense to a degree, but it will be nearly impossible to replace the large, dynamic U.S. market with more distant markets where we won’t be competitive.
asserted
we → make → markets
Though the prime minister has acknowledged that his professed trade war comes at a cost, he also needs to acknowledge the costs associated with diversification.
asserted
he → acknowledge → diversification
The EU, Japan, the U.K., South Korea and others have negotiated deals with the U.S. that included tariff hikes they didn’t like but at least brought stability and predictability — to the extent those are on offer by the current administration.
asserted
those → negotiate → administration
For its part, Mexico has taken a low-keyed approach, stating its positions clearly and concisely but avoiding escalation in actions or rhetoric.
asserted
Mexico → take → actions
Mexico has also addressed American concerns about China by enhancing screening of Chinese investments and placing tariffs of between 35 and 50 per cent on more than 1,000 Chinese items, including steel and electric vehicles, to curb trans-shipment of Chinese products through Mexico.
asserted
Mexico → address → Mexico
Unlike Canada, it has not imposed retaliatory tariffs, it is renegotiating CUSMA with the U.S. without Canada, and its president is optimistic about signing a deal with Americans.
asserted
president → impose → Americans
As a result, Mexico was not hit by the new U.S. tariffs Canada has had to bear since February.
asserted
Canada → hit → February
It’s no accident that Mexico’s trade with the U.S. increased by six per cent last year, while Canada’s slipped seven per cent, with an even larger drop in the auto sector.
asserted
Canada → ’ → sector
Canada would be in a stronger position in dealing with the U.S. if it were aligned with Mexico.
asserted
it → deal → Mexico
Instead, the risk is that the U.S. and Mexico sign a new CUSMA deal that benefits Mexico at the expense of Canada.
asserted
that → sign → Canada
Ottawa’s evident belief that delay will bring a better deal rests on risky assumptions.
asserted
delay → bring → assumptions
The Democrats will certainly improve the American approach to Canada, but their industrial policy initiatives and America’s fiscal problems likely mean tariffs will remain in some form.
asserted
tariffs → improve → form
It now seems at least possible that the Democrats could gain control of both the House and Senate, which could mean the end of Trump’s tariff wars.
uncertain
which → seem → wars
But the president can veto legislation, and it takes a two-thirds majority in both chambers to override the veto, which not even the most optimistic Democrats expect.
asserted
Democrats → veto → veto
Moreover, Trump will still have enough executive powers to continue to create economic problems for Canada.
asserted
Trump → have → Canada
Delaying a deal involves major economic costs for Canada.
asserted
Delaying → delay → Canada
Continuing uncertainty about the Canada-U.S. trade relationship only compounds them.
asserted
uncertainty → continue → them
Uncertainty deters investment.
asserted
Uncertainty → deter → investment
A recent KPMG survey found that four of 10 Canadian manufacturers, including some not affected by American tariffs, either have moved operations to the U.S. or are considering doing so.
asserted
manufacturers → find → U.S.
Tariffs result in job losses and higher prices, with low-income and vulnerable Canadians often being hit the hardest.
asserted
Canadians → result → hardest
Because many capital goods are now subject to Canadian tariffs, investment costs are also affected.
asserted
costs → affect → tariffs
Considering the stakes, it is alarming that, relative to Mexico’s, Canada’s strategy lacks clarity.
asserted
strategy → consider → clarity
Mexico, in contrast, has been clear about its end game, which is to sign a trade deal with the Americans and address American concerns such as the role of China in cross-border trade.
asserted
which → sign → trade
What is Canada’s end game in the current trade war with our biggest trading partner, buyer of 73 per cent of our exports?
asserted
game → trade → exports
Defying the deeply unpopular President Trump is excellent politics in Canada.
asserted
Defying → defy → Canada
But if the current trajectory continues, there will be significant negative consequences for Canadians, with those least able to bear the burden being hit the hardest.
asserted
trajectory → continue → hardest
The Aporia
