Now, about that White House thing ...
FORGET 1812: TARIFFS WILL BURN THE U.S. ECONOMY LIKE IT’S 2002
On the eve of the G7 summit in Quebec City, reports of a testy phone call between Prime Minister Justin Trudeau and U.S. President Donald Trump are being dismissed by the latter’s top economic adviser as a ‘‘family quarrel.’’
But there’s little question Canada-U.S. relations have taken a frosty turn over Trump’s imposition of steel and aluminum tariffs on his G7 partners. According to CNN, when Trudeau pressed Trump to explain how he could use national security to justify the tariffs on Canada, the president replied: “Didn’t you guys burn down the White House?”
Trump plans to confront other world leaders at the summit over what he believes is a global economic system tilted against the United States, John Ivison reports, escalating tensions with U.S. allies outraged at his turn toward protectionism.
With the summit, which opens Friday, leaning toward a G6-plusone divide, Trudeau welcomed French President Emmanuel Macron. The two are expected to discuss how to handle Trump.
Well at least now we know why Donald Trump considers Canada a national security threat. “Didn’t you guys burn down the White House?” he reportedly asked Justin Trudeau in a phone call late last month, referring to the War of 1812, when British troops burned down the presidential residence in retaliation for an American attack on York, presentday Toronto.
The CNN report added a degree of levity to a trade conflict that is becoming increasingly grave, one in which the U.S. has cited national security as the reason for imposing new tariffs on Canadian steel and aluminum.
Another report — this time in the Washington Post — suggested Trump will seek to stoke divisions when he arrives in Charlevoix, Que., this week for the G7 meeting. Officials are discussing ways to impose additional economic penalties against Canada, the Post reported, in retaliation for Ottawa’s threats to impose retaliatory tariffs next month.
Global Affairs Minister Chrystia Freeland said Wednesday that Canada has had no formal notification of any additional measures being contemplated.
Meanwhile, Larry Kudlow, the president’s new economic adviser, was sent out Wednesday afternoon to brief the press on the G7 trip. As is his style, Kudlow tried to pacify the agitation rather than excite it.
He said Trump will meet one-on-one with both Trudeau and French President Emmanuel Macron in Quebec.
Kudlow pointed out that the U.S. economy is the fastest growing among the industrialized nations, pushing through three-per-cent growth — a feat he attributed to Trump’s lower taxes and regulatory rollback. He suggested that the president’s trade “reforms” would “open new avenues of growth” — a position putting him at odds with Republicans like Bob Corker, the senator from Tennessee, whose state is home to foreign and domestic auto plants and who has condemned the tariffs as “a dangerous course that should be abandoned.”
Ludlow said Trump’s attempts to fix the world trading system are about “fairness and reciprocity.”
“The policies are working and we hope our friends at the G7 will take notice,” he said. And he downplayed the prospect that Charlevoix will descend into the “G6 plus 1,” as alliances with major allies unravel.
“I regard it like a family quarrel,” he said. “I believe it can be worked out.”
Kudlow presented the picture of a president who views tariffs as a cudgel that will force reluctant trading partners to open up their economies.
Problems with Canada will be worked through, he said, as NAFTA talks continue. “The U.S. and Canada will remain firm friends and allies, whatever short-term disagreements they have.”
But no matter how Trump’s latest hired gun tried to portray his leader as a man of “backbone,” taking on a broken world trade system with the simple sword of truth and the trusty shield of fair play, there are growing concerns that his trade policy might have a disastrous impact on the U.S. and global economies.
In its latest global economic prospects report, the World Bank warned that trade tensions could see global trade decline nine per cent, a drop equivalent to the 2008 financial crisis.
Kudlow was unconvincing when asked how the current situation differs from that which saw President George W. Bush impose steel tariffs in 2002. In that case the tariffs were withdrawn 18 months later after adversely affecting GDP and employment in the U.S.
The Americans were, in that instance, on the receiving end of a World Trade Organization decision that ruled an anti-dumping response was inappropriate because imports were actually declining at the time.
That precedent is unlikely to daunt Trump. As Kudlow said, “international multilateral organizations are not going to determine American policy.”
But a drop in U.S. growth or employment might make the president think twice.
Canadian officials say they are already seeing evidence that the U.S. tariffs are having a boomerang effect. One New York State-based company that has plants on both sides of the border has complained about tariffs being imposed on finished goods — costs that are inevitably passed on to U.S. customers.
These unintended consequences are kicking in even before Canada and other countries retaliate against the steel tariffs.
Kudlow couldn’t point to a difference between 2002 and 2018 because there is none. The results will be the same — which Trump must know. In which case, the tariffs and any additional penalties are a ruse, a negotiating ploy to wring concessions from trading partners.
It may be that we are nearing the end game. If Trump takes the NAFTA sunset clause off the table when he meets Trudeau on Saturday morning — the contentious proposal that would automatically end the deal after five years if all three member countries failed to re-approve it — they could reach the bones of a deal.
If he doesn’t, Trudeau should call his bluff.