Blame Canada was a spoof, Mr. President

NATION COULD FACE A TRADE NIGHTMARE AS TRUMP TARGETS DAIRY, LUMBER, AND WHAT NEXT?

As Donald Trump heads towards 100 days in power with nothing much to show for it, he appears to be attempting to distract public attention by making Canada a scapegoat.

“Everything’s gone wrong since Canada came along” is no longer just a line from the South Park movie.

Who would be surprised if Trump broke into a chorus of: “Blame Canada, with its hockey hullabaloo and that b---Anne Murray, too”?

On Monday evening Wilbur Ross, the American commerce secretary, lamented the deteriorating special relationship and notified Canada of $1 billion in softwood lumber countervailing duties.

On Tuesday, Trump held a White House photo opportunity with U.S. farmers in order to highlight how “rough” Canada has been on the U.S., how Canadians have “outsmarted” America and how the United States will no longer put up with it.

“Watch!” he warned in a tweet about the dairy industry that was pregnant with as much menace as if he were Dirty Harry wielding a .44 Magnum.

Humans are designed to overestimate threats as a means of self-protection — better safe than sorry.

But Trump’s unpredictable nature means Canada could face its worst nightmare as early as Wednesday, when the president unveils his tax-reform package. There is a suspicion among some informed observers that a punitive tax on imports, particularly oil, might be on the president’s agenda as a means of funding his plan to cut corporate income tax to 15 per cent from 35 per cent.

Could a bad week for Canada-U.S. trade relations be about to get even worse? Disputes over softwood lumber and dairy would pale by comparison to a border tax.

The real problem for Trump is that his $2.2-trillion tax cuts (the amount of corporate tax revenue the U.S. government would forgo over 10 years, according to the Tax Foundation think tank) needs to be offset by revenue-raising measures elsewhere.

If they are not, and the cuts are simply added to the deficit, Trump will have trouble getting the measures through Congress.

The American oil economist Philip Verleger was in Ottawa last week, where he pointed out that Bill Clinton tried to bring in an energy tax in the 1990s and was eventually forced to settle for an increase in gasoline tax. Verleger said attempts to bring in a broader 20 per cent border adjustment tax could end the same way — with an oil import fee being imposed on Canada and other countries exporting to the U.S.

James McIlroy, a former senior adviser to the Canadian trade minister and principal at consultants McIlroy & McIlroy Inc., said it is ominous that Canada is all of a sudden in Trump’s crosshairs. “I think there’s going to be a hurricane,” he said.

McIlroy said Trump has a legitimate grievance on dairy, where Canadian milk protein concentrate used in cheese is cross-subsidized by liquid milk produced under this country’s protected supplymanagement regime.

“That really plays into Trump’s narrative that the U.S. is getting screwed — ‘We signed a trade agreement and as soon as we export, they close off our exports.’ He’s got a good point,” said McIlroy.

Both Wisconsin and New York are key political states for Trump. Wisconsin is home to Speaker of the House of Representatives Paul Ryan, and New York State is home to Senate Minority leader Chuck Schumer. Both geared up to export milk protein concentrate to Canada, only to find the market closed off by rule changes that left farmers south of the border without a market.

The Canadian government could reverse that change but then farmers in this country would be left without a customer base.

It’s a tough call, but sooner rather than later Canada is going to have to phase out supply management, before it beggars the rest of the economy. McIlroy said it is entirely possible that Trump decides to export the dispute into other sectors.

It’s true that slapping an import tax on oil might cause a backlash. “Raising petroleum costs in the U.S. is like raising the price of bread in Egypt. It tends to produce a violent reaction,” said McIlroy. But he said he does not think trade disputes between Canada and the U.S. will be limited to dairy and softwood, particularly with the looming renegotiation of the North America Free Trade Agreement.

Ross said in his White House press conference that no further action is being “immediately contemplated” in the wake of the levies on softwood lumber.

He downplayed the prospect of a trade war. “It would be a stimulative thing for your readership but we don’t think that’s going to happen,” he told a reporter.

Ross pointed out that the softwood lumber levy was not Trump’s decision and stemmed from a trade case that was already underway when he was elected.

Both dairy and softwood have been trade irritants for years, but there is no doubt the tone has changed.

When Justin Trudeau visited Barack Obama in the White House Rose Garden just over a year ago, the then-president dismissed softwood lumber as a “longstanding bilateral issue but one that hardly defines the Canada-U.S. relationship.” It does now. One does not need to have a narrow threat-perception to believe that Trump might pull the trigger, now he has cocked the hammer.

Canada is the No. 1 customer for U.S. goods. The two countries share a trade relationship that is largely in balance. We are best friends, whether we like it or not.

Trump has a legitimate grievance on dairy. But that does not justify the disrespect and heated rhetoric we are now seeing.

America has a president who is attempting to manipulate public attention away from his inability to enact his agenda by trying to rally patriotic fever against his neighbours.

The song Blame Canada ends with: “We must blame them and cause a fuss/Before someone thinks of blaming us.” It was meant to be spoof political commentary but it rings true in this case.

As the late comedian Robin Williams put it so presciently, “People say satire is dead. But it’s not dead; it’s alive and living in the White House.”