Frozen-out north? The chilling of US-Canada trade
Monday, June 25, 2018
Of all the potential trade war scenarios that forecasters murmured over in the current administration, the prospect for Canada to be involved was, at the very least, low on the list.
After an unprecedented announcement of a 10 percent tariff on imported aluminum and a staggering 25 percent tariff on imported steel by U.S. Commerce Secretary Wilbur Ross back in May, Canada's nigh-legendary reputation of politeness began to slip a bit.
Prime Minister Justin Trudeau didn't mince any words, with phrases like "inconceivable" uttered in the wake of the announcement, as well as a suggestion that the tariffs were "an affront to the Canadians who died" in allied battles alongside their American counterparts. President Trump, for his part, countered by labeling the PM "dishonest and weak."
Where It Hurts: Maple Syrup and 'Hair Lacquers'
While the move to meet tariffs head-on for steel and aluminum crossing the border in the opposite direction was hardly surprising, the diverse melange of additional tariffs that followed suit was.
Tariffs "tapped" the likes of imported American whiskeys and beer kegs, as well as toilet paper, in a Canadian bid to show the U.S. that the Maple Leaf flag wouldn't be pushed around.
While the additional items were largely symbolic in the shadow of the raw goods' enormity, the Canadian people backed Trudeau's move: an overwhelming 79 percent of national poll respondents approved of the tariffs, regardless of how difficult it might make obtaining American-made products in their country. The support of the country stands in stark contrast to the lack of support for President Trump's initial trade aggression: 66 percent of Americans polled on the matter believe that foreign leaders don't respect Trump.
Why the US-Canada Tariff Spat Matters
After the European Union, Canada is the United States' second largest trading partner, dealing with in excess of 670 billion in inter-country trade each year.
The United States is Canada's largest trading partner, which is why a recent CD Howe Institute report found that the tariffs, once implemented on both sides, will pack a negative economic punch on both sides of the border. Canada stands to lose 0.33 percent of its GDP and up to 6,000 jobs, while the U.S. would lose 0.02 percent of its GDP and more than 22,000 jobs at the same time.
Beyond the chilling effect on trade between the two countries, the ever-escalating tariff disagreement paints the U.S. in an unflattering light: unreliable and prone to emotional and punitive measures when criticized. While Canada is arguably beholden to its southern neighbor for at least a measure of economic stability, the EU isn't so reliant on American goods.
If the bloc deems the U.S. reputation broken enough, it could lead to a chilling trade effect, with the only difference being the country on the unfavorable side will be the U.S.
While there has been something of a cyclical pattern to recent U.S. trade disputes — publicized drama, harsh words, escalating tariffs, and finally a return to the negotiating table — the trend is worrisome for manufacturers and importers, who wonder if the next shipment arriving may be their last profitable one for a while.
They can only hope that cooler heads and trade agreements prevail, and that tensions pull a well-timed U-turn as quickly as that infamous China-bound sorghum ship did back in April.
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