If Canada is hit with 25 per cent, across-the-board tariffs this weekend — or on March 1 if a leaked rumour is to be believed — it will be the result of a trade-warmonger with a protectionist axe to grind. Blame for a good part of the pain that will follow, however, will lie with our own country and its utter contempt for economic growth.
Canada can’t just roll over and accept repeated beatings on trade in the months going forward, but it has to be realistic about any response. Proceed with care and caution.
Bold counter-attacks against the U.S. can’t work, because all the ideas Canada could have put into action to make such a response viable are collecting dust on the cellar shelf. Drop interprovincial trade barriers that amount to a $200-billion penalty on the national economy every year? That only became a serious conversation in the last month. It should have been a serious conversation 10 years ago, if not more.
End supply management? Out of the question — think of the Quebec votes such a move would cost. The Big Milk lobby is a strong one.
How about resource development? Because Canada is ultimately a resource-exporting economy? No; we’ve been cancelling energy projects at the slightest objection and building more legislation to stand in their way. Industries like mining and fishing, already mired in growth-choking regulations, are increasingly refashioned by governments into welfare and “reconciliation” initiatives, repelling private investment that would have brought prosperity to the country as a whole.
Diversify away from the Americans? We’ve only done the opposite: since 2017, Canadian trade has become more focused on the U.S.
Canada should be a prosperous, growth-oriented economy, but instead, its government — and the people who continuously vote for economy-stagnating policy — settle for subsistence and redistribution of a shrinking pie of wealth. Their choices for the past decade have left us without enough fat to get through a cold trade winter.
Prompt retaliatory counter-tariffs are hence unwise. Such a move would put Canadians in the path of two separate blows, one from the front, the other from the back. And while immediate counter-tariffs could affect Americans whose support the president depends on — as was the case in the 1930s, when Canadian counter-tariffs prolonged the American Great Depression (while inflicting domestic pain) — those Americans have much bigger economic fat stores. In a trade war of attrition, expect Canada to lose.
That leaves us, unfortunately, with the less-glamourous immediate option: play this by the book. The United States-Canada-Mexico free trade agreement, which will be violated by any across-the-board tariff Trump applies, needs to be challenged with the mechanisms agreed upon by party states. During the process, Canada must remind Trump that it’s just following the agreement that he made.
On this route, Canada has prevailed before. When the U.S., at Trump’s direction, imposed tariffs on all imported solar panels and cells in 2018 — without exempting Canadian products, as the free-trade agreement required — the panel ultimately sided with Canada in 2022. The U.S. later lifted the tariffs.
Canada has also demonstrated itself to be a good-faith partner under the agreement, willing to adjust its own policies when it’s found to be at fault. In 2022, the dispute resolution panel concluded that the Canadian dairy market wasn’t open enough to satisfy free-trade obligations; Canada adjusted its policies (the U.S. complained a second time after this, but the panel ruled in 2023 that Canada was playing by the rules). And though it’s possible that Bill C-11’s three per cent tax on American digital giants offends the trade pact, we can affirm that we’ll comply with whatever decision the panel comes to.
This isn’t a perfect answer by any means: the panel process often doesn’t lead to timely resolutions, and the U.S. doesn’t like to lose — it’s still unhappy with Canadian dairy policies though they were cleared, and it has yet to resolve certain rules on auto imports that the panel found to contravene the agreement. But it’s at least an avenue that can demonstrate that Canada is a reasonable country that sticks to its word, and not a scamming freeloader as Trump so often implies.
Counter-tariffs still remain in Canada’s back pocket, all said: if used, they should be strategic, targeting Republican-sensitive sectors. Electric vehicles are close to Trump ally Elon Musk’s heart; American bourbon is often a product of red states; the list can go on.
Canada can also acknowledge its faults, and work to remedy them. It’s an objective fact that this country has lagged on military spending and been a poor partner within NATO — and that has to change. On the border, while the Canadian problem is minor compared to that of Mexico, it’s still a problem: this country has been a staging ground for Chinese fentanyl and fentanyl precursors, some of which end up in the U.S., as well as a source of illegal migrants, thanks to years of lax entry rules.
It’s true that Trump’s border demands lack specificity — “show us the respect, shut your border,” as his pick for commerce lead has said, isn’t an actionable request. Canada needs a checklist — say, number of smuggler convictions, number of foot patrols, amount of money spent — to properly follow through. Canadian foreign affairs minister Mélanie Joly should spend her time trying to obtain one instead of courting Trump’sopponents, who are in no position to help us.
What we absolutely cannot do is allow the country to tear itself apart in panic. Inflationary CERB-like pandemic relief, as B.C. Premier David Eby is asking despite having choked his province’s economy since becoming leader, and as NDP leader Jagmeet Singh is promising to support before turfing the Trudeau government, should be out of the question. It’s a snake-eating-its-own-tail policy that steals from the future to entice the voters of today, rewarding the Liberals politically for impoverishing the country. It can only make life in Canada worse.
Nor can any one province be forced by the feds — who are eyeing Alberta for exactly this — to bear the brunt of tariffs alone. It’s needlessly divisive, and Canadians across the country don’t believe it’s right.
Above all, we can’t stoop to the childish tactics, on display by some Liberal politicians, as well a left-wing media, of accusing those who disagree with whatever approach the government takes as traitorous, covert secessionists. It’s nonsense. Canada needs a realistic plan to achieve the least-bad outcome, but Ottawa is run by people who are frequently deluded into believing their own fantasies. If the critics manage to stave off yet another Liberal attempt at economic suicide, they should be thanked — not shamed.
National Post