Trade row: Trump dou­bles down on Trudeau as an­a­lysts warn of US im­pact

The Guardian Australia - - Politics / World News -

Donald Trump has dou­bled down on his crit­i­cism of Justin Trudeau, warn­ing that his stance on trade dis­cus­sions was a “mis­take” that would cost Canada “a lot of money”.

At a news con­fer­ence on Tues­day af­ter his sum­mit with North Korean leader Kim Jong-un, Trump re­ferred to the Cana­dian prime min­is­ter’s pledge to pro­ceed with re­tal­ia­tory mea­sures in re­sponse to Trump’s move to im­pose tar­iffs on alu­minum and steel.

“That’s go­ing to cost a lot of money for the peo­ple of Canada. He learned,” Trump said, wag­ging his fin­ger. “You can’t do that. You can’t do that.”

Trump of­fered no de­tail, but his com­ments marked the lat­est in a string of abra­sive re­marks from se­nior US of­fi­cials – and ap­peared to dash any hopes of a swift res­o­lu­tion to the trade row which has helped push re­la­tions be­tween the two coun­tries to their low­est point in re­cent mem­ory.

An­a­lysts warned that the US pres­i­dent’s next tar­get could be the coun­try’s au­to­mo­tive sec­tor, a move that would fur­ther pun­ish Canada – but also un­leash a cas­cade of eco­nomic con­se­quences on both sides of the bor­der.

“What you’re essen­tially talk­ing about is drop­ping a nuclear bomb in mid­dle of the North Amer­i­can in­dus­trial econ­omy and wait­ing for the con­se­quences to play out,” said Eric Miller, an econ­o­mist and global fel­low at the Canada In­sti­tute at the Woodrow Wilson Cen­ter.

Trump has pre­vi­ously floated the idea of im­ple­ment­ing a 25% tar­iff on au­to­mo­biles com­ing across the Cana­dian bor­der. But years of trade and in­vest­ment be­tween the two na­tions has pro­duced a tightly-in­te­grated man­u­fac­tur­ing sys­tem, blur­ring the lines on coun­try of origin: on av­er­age, a ve­hi­cle passes the bor­der seven times dur­ing the man­u­fac­tur­ing process.

As a re­sult, a pre-emp­tive at­tack on the Cana­dian au­to­mo­bile man­u­fac­tur­ing net­work – the largest sup­plier to the US – would have last­ing ef­fects for Amer­i­cans.

“You are look­ing at di­rect and in­di­rect em­ploy­ment in the sec­tor of hun­dreds of thou­sands of peo­ple in Canada and mil­lions of peo­ple in the United States,” said Miller, point­ing out that ev­ery job in the au­to­mo­tive sec­tor cre­ates an es­ti­mated

seven pe­riph­eral jobs.

The pro­posed tar­iff would add an additional $6,250 to a $25,000 car, said Miller.

Canada would likely join other coun­tries in re­tal­i­a­tion, in­clud­ing Ja­pan, Mexico and the Euro­pean Union, caus­ing equiv­a­lent price spikes for Amer­i­can con­sumers and rip­ples that could morph into waves through­out the econ­omy.

“The United States can in­flict a lot of dam­age on the Cana­dian econ­omy. But the re­al­ity is that by do­ing so, it would in­flict dam­age upon it­self,” said Pa­trick Le­blond, an in­ter­na­tional trade ex­pert at the Cen­tre for In­ter­nal Gov­er­nance In­no­va­tion.

Trump, who was elected on a prom­ise to re­store US man­u­fac­tur­ing jobs, has pre­vi­ously at­tacked car man­u­fac­tur­ers based in Europe, Ja­pan and Canada.

But a trade war is likely to most af­fect some of the states that handed him the pres­i­dency, which are them­selves de­pen­dent on for­eign com­merce: 36 states count Canada as their largest trad­ing part­ner.

Mean­while, Canada de­pends heav­ily on the US econ­omy for trade – mak­ing it par­tic­u­larly vul­ner­a­ble to dis­rup­tions. For years, Canada has sup­plied its south­ern neigh­bor with raw ma­te­ri­als: grain, lum­ber, oil, steel and alu­minum.

“At some point, some­thing’s got to give. And when Amer­i­cans start los­ing their jobs, they’re go­ing to go back to their sen­a­tors and say: ‘What are you do­ing about this? We just lost our jobs and it’s be­cause of Trump’s poli­cies,’” said Le­blond.

“Canada and the United States have one of the largest trad­ing re­la­tion­ships in the world and amid that, one of the most bal­anced trad­ing re­la­tion­ships,” said Michael Gre­gory, deputy chief econ­o­mist at BMO World Mar­kets.

Trump has also taken aim at Canada’s con­vo­luted dairy sup­ply man­age­ment sys­tem, val­ued at $21bn. Ini­tially de­vel­oped as a means of pro­tect­ing farm­ers, the sys­tem places hefty du­ties on im­ported dairy prod­ucts, dis­cour­ag­ing im­ports of Amer­i­can dairy prod­ucts while fa­vor­ing do­mes­tic pro­duc­tion.

“It’s very un­fair, and it’s very un­fair to our work­ers, and I’m gonna straighten it out. And it won’t even be tough,” Trump told re­porters on Tues­day while in Singapore.

While the es­ca­lat­ing trade spat is un­fold­ing un­der the aus­pices of a Nafta rene­go­ti­a­tion, the Amer­i­can’s chief ne­go­tia­tor in the pact, Robert Lighthizer has re­mained silent amid out­bursts from other top trade of­fi­cials.

Cana­dian of­fi­cials re­main com­mit­ted to stay­ing in the trade pact and will con­tinue to ne­go­ti­ate, said Miller, but tar­iffs will con­tinue to be met with pro­por­tional counter mea­sures. “If you wanted to start a global trade war, tar­get­ing the auto sec­tor would be the way to do it,” he said.

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