Tariffs -- Canada vs the United States

Tariffs -- Canada vs the United States by Maj (ret’d) CORNELIU, CHISU, CD, PMSC FEC, CET, P.Eng. Former Member of Parliament Pickering-Scarborough East The saga of tariffs continues at the mercy of the United States. President Donald Trump continues to weaponize import duties, cajoling and bullying nations to agree to hastily enacted trade deals that oftentimes fall woefully short of addressing even the most basic tenets of his perceived gripes. With deadlines set and postponed, he creates a continuous incertitude, more accurately referred to as chaos. This treacherous landscape makes for a bruising and precarious dialogue between North America’s two biggest trading partners and once-great friends. The announcement of a 35 per cent increase in tariffs on all Canadian goods by August 1 places Ottawa’s leaders between a proverbial rock and a hard place. Prime Minister Mark Carney will have a difficult job navigating these precarious turbulences. This is the environment Canadian negotiators find themselves in. One small misstep has the potential to send talks screeching to an abrupt halt, and the very real possibility of being on the bruising end of this unhinged President’s scathing tirades. As the Aug 1 deadline for a Canada-U.S. trade deal gets closer, Prime Minister Mark Carney has stated that it is unlikely a deal will be made without some level of tariffs. This was the first public admission from Carney although he recently expressed some doubt that Ottawa could immediately lift some of Trump’s tariffs during trade talks. President Donald Trump appeared to be losing patience with his administration’s efforts to make trade deals with nations around the world. The President has been sending letters to trading partners, including Canada, threatening to impose higher tariff rates on Aug. 1. The letter addressed to Carney last week said Canada would be hit with 35 per cent tariffs but the White House later stipulated it would not include goods compliant with the Canada-U.S.-Mexico Agreement on trade. The President’s actions and approach to the tariffs issue is creating a very complicated trade problem to resolve. President Trump posted a letter to Mexican President Claudia Sheinbaum on social media that said Mexico would be hit with a 30 per cent rate. A separate letter to European Commission President Ursula von der Leyen declared a 30 per cent rate for the European Union. There is no clarity on why Canada is facing a higher tariff than either Mexico or the EU. It is strange but we are living in a strange world. Canada and Mexico are the top two U.S. trade partners, and Canada is a national security partner as well. Yet we have no reasonable explanation as to why Canada is hit with a 35 (per cent) tariff while Mexico only gets a 30 (per cent) tariff. Prime Minister Mark Carney has been proactive on defence and border security spending. It would be hard for the United States to claim Canada was not bargaining in good faith. While Canada was “nice,” it got hit with a tariff nearly as high as the 50 per cent Brazil is facing. It does not make any sense. It makes sense only if the President of the United States is still aiming to make Canada the 51 US state. In that case, putting such immense pressure on the Canadian economy might be an effort to make Canada surrender. Prime Minister Carney and President Trump have been negotiating what they have referred to as a new economic and security pact since the pair met at the White House in early May. At the G7 summit last month, Carney said they had set July 21 as a deadline for reaching that deal. However, Trump unilaterally delayed it to Aug 1st. Trump raised tariffs on steel and aluminum from 25 to 50 per cent in June and Carney has held off following suit pending the possibility of a deal. Canada has made a few other moves to aid industry on this side of the border, including new limits on the amount of foreign steel that can come in before high tariffs are charged. Canada also implemented a new interim policy on reciprocal procurement to restrict the ability of companies to bid on government contracts if their home country limits Canadian access to their government contracts President Trump has also raised the tariffs on copper by 50 per cent recently. According to data, the U.S. was Canada’s largest copper importer in 2023. In a Truth Social post, Trump’s ominous message portends the upheaval that is on the horizon. He stated, “America will, once again, build a DOMINANT Copper Industry. THIS IS, AFTER ALL, OUR GOLDEN AGE!” Let’s face it, there is a fundamental asymmetry in the Canada-U.S. trading relationship. We are largely in the business of exporting commodities and intermediate goods, and that gives president Trump a certain amount of advantage. However, it also exposes U.S. industries, U.S. manufacturers. We are already seeing evidence of that in the 50 per cent tariff on aluminum which creates problems for US manufacturers. In this surreal environment of trade negotiations with the United States I sincerely hope that Canada will emerge with the least amount of damage. Only time will tell if we have succeeded or not. It is a difficult job and needs real skill. Let us hope Prime Minister Carney and his team will be able to make the best deal for Canada. Long live Canada!