National Post (National Edition)
Stickhandling NAFTA and metals tariffs
WASHINGTON •Inorderto persuade Donald Trump to drop his punishing steel and aluminum tariffs and agree to a renegotiated NAFTA, Canada’s strategy is to somehow engineer a way for the U.S. president to claim a political victory by doing just that.
That’s the only way forward, now that Trump has triggered a sprawling trade war by imposing import duties of 25 per cent on steel and 10 per cent on aluminum from Canada, Mexico and Europe, sources familiar with Ottawa’s position told The Canadian Press.
Sources say Trump will eventually have to consider the combination of the strong internal Republican and American business opposition to the tariffs, as well as the simple passage of time as the negative effects eventually trickle down to U.S. consumers.
It is still too early to assess the economic impact of the last two days, but at some point Canada is counting on Trump’s “America First” protectionism to ultimately be proven wrong.
No one can say for certain just yet exactly when Trump’s “calibrations” will be proven incorrect, “least of all on Day 2. But it will be known,” said one source, who spoke on condition of anonymity because of the sensitivity of the situation.
“The reality is the commitment to might-makesright trade policy is going to bash into the fact that it is not going to elicit success to the president.”
In a CBC radio interview Friday in Halifax, Prime Minister Justin Trudeau called the tariffs “ridiculous” and predicted they would backfire. Canada has responded to the tariffs with retaliatory dollar-for-dollar “countermeasures” on up to $16.6 billion worth of American imports.
“We’re actually going to see hardship happening on both sides, particularly on the American side of the border, as the unintended consequences of putting trade tariffs on their closest ally and trading partner begin to be felt.”
In Halifax to speak to the Federation of Canadian Municipalities, Trudeau pledged Friday to work with Canadian companies hit by the tariffs to protect jobs and workers, but offered no details.
Finance Minister Bill Morneau, in Whistler, B.C., for the G7 finance ministers’ meeting, said the government isn’t quite ready to discuss support or potential bailout packages for those Canadian sectors caught in the crossfire.
He said the focus now is to use Canada’s threat of retaliatory measures as a way to make the U.S. reconsider its own tariffs before any negative economic impacts actually materialize.
On Friday, Canada, along with the European Union, filed a challenge to the U.S. tariffs with the World Trade Organization and said it will request a Chapter 20 panel under the North American Free Trade Agreement.
Canada will fight to preserve the international trading order because it has no choice, said another source. “We can’t live in a world where might makes right. As Canada, we need a rulesbased system.”
The key, sources say, will be to find a way to give Trump the political cover he needs to claim a face-saving political victory. “It’s all about what’s seen as a win and what’s seen as a success in the White House,” said one source. “What Canada and Mexico are willing to bring to the table is something that could deliver success.”
Canada is counting on the fact that members of Trump’s own Republican Party, as well as U.S. business leaders, are critical of the tariffs and his protectionist approach to NAFTA, insiders say.
Trump continued to face criticism Friday. French President Emmanuel Macron called the tariffs illegal and a “mistake.” Cecilia Malmstrom, the EU trade minister, said the tariffs amounted to “pure protectionism” and are “further weakening the transatlantic relations.”
Trump, unmoved by all of it, dug in his heels.
“Canada has treated our agricultural business and farmers very poorly for a very long period of time. Highly restrictive on trade!” the president wrote on Twitter.
“They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do timber and lumber in U.S.?”
The sources interviewed Friday emphasized that anything could “turn on a dime” with Trump; hours later, they were proven correct.
Trump suddenly opined that he would be more open to bilateral trade deals with Canada and Mexico than to a renegotiated NAFTA, which he has repeatedly threatened to rip up.
“To be honest with you, I wouldn’t mind seeing NAFTA where you’d go by a different name, where you’d make a separate deal with Canada and a separate deal with Mexico,” Trump said.
“They’re our allies, but they take advantage of us economically. I love Canada, I love Mexico. I love ‘em. But Mexico is making over $100 billion a year, and they’re not helping us with our border, because they have strong laws and we have horrible laws.”