For all the bravado about retaliation, Canadians were like prisoners on death row on Monday morning, waiting for the door handle to turn to find out if they’d been granted a reprieve or were about to have their final breakfast.
The Wall Street Journal story that Donald Trump won’t impose broad tariffs on Day One of his presidency, instead ordering a review of trade and currency imbalances, was like a stay of execution.
It may only be temporary. After all, it’s unlikely that Trump has changed his mind about tariffs being “the greatest thing ever invented.”
But who knows how long an investigation into U.S. trade deficits might take?
At the very least, it gives Canada breathing space to resolve its domestic political dysfunction, and to continue to make the case that a trade war will push up the price of gas, groceries and home heating for American consumers.
The relief is palpable. Across-the-board 25-per-cent tariffs could have kicked off a chain of events that resulted in Canada’s GDP diving by three to six per cent, the loonie depreciating by 25 per cent and half-a-million people being thrown out of work. Interestingly, modelling by the Bank of Canada in 2019 suggested that level of tariffs, with symmetrical retaliation, would see long-term prices in the U.S. rise by nearly 10 per cent.
Bloomberg has reported that tariffs are still on the agenda, likely introduced in a graduated form that increase by two to five per cent a month.
But even that sounds more like a negotiation than an all-out assault. A “senior Trump advisor” told the WSJ that the president will approach trade in a “measured way.”
Trump’s nominee for commerce secretary, Howard Lutnick, has previously said that tariffs will be used as bargaining chips. “We should put a tariff on stuff we make and not put tariffs on stuff we don’t make,” he told MSNBC’s Squawk Box.
Who knows how long an investigation into U.S. trade deficits might take?
Canada is not defenceless and, while the distress of a tariff war would be greater north of the border, it would seep south. Ontario premier Doug Ford said that he has directed the Crown agency that retails liquor in the province to take U.S. alcohol off the shelves if Washington hits us with tariffs.
“We are the largest purchaser of alcohol in the entire world. They will feel the pain,” he said Monday.
The deferment of Trump tariffs will give the Liberal party time to wrap up its truncated leadership race and may even allow for the general election campaign necessary to restore political stability.
All polls show the Conservatives on course for a massive majority, but an EKOS survey that emerged late last week suggested the lead has narrowed to 11 points, compared to 26 points in the most recent Abacus Data poll. EKOS reported a dramatic shift in the vote in Ontario and the Atlantic provinces that sees the Liberals in a statistical tie with the Conservatives.
Abacus chief executive, David Coletto, attributed this to interactive voice response polls (as used by EKOS), which give more weight to committed voters prepared to answer their phone to a pollster, versus online polls (as used by Abacus) that are more stable and slower to shift.
The concern for Conservative Leader Pierre Poilievre will be that the EKOS poll is a harbinger, rather than an outlier.
Poilievre seemed to have struck on a magic formula, promising to end Justin Trudeau’s time in power and to axe the carbon tax.
But Trudeau is leaving in March and the leading candidates to replace him as Liberal leader, Mark Carney and Chrystia Freeland, have both suggested they will end the consumer carbon tax.
It is a test for Poilievre. As one long-time observer of the Canadian political scene said, the Conservatives are a bit like the Russian military. “They pound their targets to dust, but they are not very agile. Pierre has not sealed the deal yet,” he said.
Poilievre is going to have to come up with a new playbook if he is going to maintain his lead in public opinion.
The latest episode of The Rest is Politics podcast heard hosts Alistair Campbell and Rory Stewart debate the power of populism. Campbell said Trump’s victory convinced him that delivery is not enough and that slightly superior technocratic solutions are swamped by the weight of social media.
Stewart warned that Western countries are “losing their moral compass” as populists challenge the old ideas of liberal democracy and human rights; free trade; and the world order of rule of law.
“These three things were hard-won lessons at the end of World War Two about preventing war,” he said.
Poilievre has always focused more on economic populism, rather than on the cultural warfare engaged in by Trump.
But Canada may prove there are limits to populism’s appeal.
Canadians are recoiling from the president’s talk about this country as the 51st state and are conscious of the threat to their well-being his threatened tariffs would pose.
Even Conservative MPs are reportedly hearing at the doors that voters want Trudeau gone but are not all in on Poilievre.
It would be no great shock if the polls do start to narrow in the coming months.
The brief respite from the external threat will allow Canadian voters to take a deep breath — and another look at who they think is best qualified to tackle the challenges of Trump’s presidency.
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