Canada is already preparing for Trump's potential tariff threats

Canada staged a largescale diplomatic deploy‐ ment this week in prepara‐ tion for a U.S. presidential election of more conse‐ quence than usual.

More than a dozen Cana‐ dian diplomats posted in var‐ ious U.S. cities came to Wash‐ ington to meet with scores of American lawmakers on Capitol Hill.

Looming over their visit was the potential return of Donald Trump to the White House. In particular, there's one Trump policy they're watching warily this year.

The former president has promised a worldwide tariff on imported goods if he wins. This would be stricter than any trade policy from his first term.

Trump has offered mini‐ mal details about the policy in his campaign literature and in media interviews but has said he envisions a 10 per cent global tax.

Would that apply to Cana‐ da?

Neither Canadian officials, nor Trump's allies, have a clear answer on that. Trump has been vague about which countries and products might be included or exempted.

But Canada's starting po‐ sition, as one might expect, is that, no, there should not be penalties on a country - ours - that recently signed a freetrade agreement with Trump, which he has praised repeat‐ edly as the best ever.

"We will have a serious conversation with them if they're looking to apply that policy to us," Kirsten Hillman, Canada's ambassador, told CBC News.

"But I think the starting point is that it shouldn't - and we have just concluded a deal that is 99 per cent tarifffree," she said, referring to the new NAFTA.

Tariffs on Canada? De‐ pends who you ask

It's worth watching Trump's platform closely, as current polls give him a decent chance of being returned to office in the November elec‐ tion.

Even in Washington there's no clear consensus on what his policy might ulti‐ mately look like. Ask different people about tariffs on Cana‐ da, and you'll get different answers.

"I have a hard time believ‐ ing that would be the case," Michigan Republican con‐ gressman Bill Huizenga told CBC News. "Especially when it comes to the trade agreement that he negoti‐ ated, and led."

North Dakota Sen. Kevin Cramer says that's exactly what he tells Trump: "We talk about these things a fair bit," he said. "I think we should have a North American strategy. Not a U.S.-only strategy."

An expert who supports Trump's tariff policies says he's not sure this will affect nations with free-trade deals; he suspects it probably will, but adds that Trump is at‐ tempting to do something unprecedented under mod‐ ern law.

"There's literally no prece‐ dent," said Charles Benoit, a Canadian-born, U.S.-based trade lawyer with Coalition For A Prosperous America, a pro-domestic manufacturing group.

He expects Trump would invoke the Trade Act of 1974. Its section 122 allows a presi‐ dent to set a maximum 15 per cent tariff, for up to 150 days, in the event of a bal‐ ance-of-payments deficit with other nations, which the U.S. consistently has.

He says Trump could then try extending it, again and again, every 150 days. This would certainly trigger law‐ suits, as the law says extend‐ ing it requires an act of Con‐ gress.

Benoit's advice: Let it lapse for a day, then keep reimposing the tariffs every 151 days.

"I think that that's some‐ thing that the president could do. Just do it - [and] do it a second time after letting it lapse," he said in an inter‐ view.

WATCH | U.S. and Cana‐ dian economies 'more inte‐ grated now than ever,' minister says:

One of Washington's bestknown trade-policy experts over several decades says such behaviour would make a mockery of the language in the bill.

It would be challenged in court, Gary Hufbauer said. Meanwhile, countries would launch retaliatory tariffs.

As for Canada, here's his prediction: The northern neighbour will get an exclu‐ sion, as would Mexico. But it won't come for free.

He expects Trump to use the threat as a negotiating ploy - a stick to threaten Canada and Mexico into making concessions.

"He will bargain - to get something for that exclu‐ sion," Hufbauer said, noting that when it comes to Trump, "[It's] all transactional."

As for what Trump might ask for, he's already com‐ plained, as has the Biden ad‐ ministration, about the way Canada has implemented certain aspects of the new NAFTA. Specifically, dairy and autos.

"Dairy comes up right away," Hufbauer predicted.

Parsing the words of Trump's trade czar

One thing Trump has already succeeded at doing is reori‐ enting the American political consensus on trade.

The current Biden admin‐ istration has maintained most of his policies. The two presidents may differ in style, but they agree substantively on trade.

That philosophy has been articulated at length by Trump's former trade minis‐ ter. In his book and several magazine pieces, Robert Lighthizer has laid out some of the tariff policies Trump is now running on.

Lighthizer remains in the picture: He's advising the Trump campaign, and re‐ cently said publicly that he intends to be involved in the next administration if Trump wins; either serving in an offi‐ cial role, or as an outside ad‐ viser.

His basic argument is that globalization has impover‐ ished the U.S. working class; made the country incapable of producing vital goods; lost manufacturing industries that drive innovation; and left it dependent on a potential military rival (China) for basic everyday products.

He has little patience for people who call the United States protectionist, when it has among the lowest tariffs in the world.

And when it comes to Canada, Lighthizer's book takes the country to task for seeing itself as a free trader, then adopting "parochial" and "protectionist" policies around everything from dairy to television to telecoms.

He said tariffs on Canadi‐ an and Mexican steel were useful; Trump imposed them, then lifted them, and threat‐ ened to reimpose them.

"The fact that President Trump was willing to impose tariffs on two of America's closest trading partners - one of whom, Canada, is also one of our closest allies - sent an unmistakable signal that business as usual was over," Lighthizer wrote in his book, No Trade Is Free.

WATCH | Canada and Mexico win first test of new NAFTA:

What next?

The tangible effects of Trump's trade policies remain in dispute.

Several studies say his tar‐ iffs had a minimal positive impact on U.S. jobs, and a minimal harmful impact on the economy and inflation.

One trade economist and historian says Trump's poli‐ cies shifted some production from China, primarily to Viet‐ nam and Mexico; meanwhile, China bought more food from Brazil.

"In the political debate, both the benefits and the costs [of tariffs] tend to get exaggerated," said Douglas Irwin of Dartmouth College.

But what Trump is proposing now is bigger than his first-term tariffs, which the Congressional Budget Of‐ fice said shaved 0.3 per cent off the U.S. economy.

Trump also wants Con‐

gress to pass a law that would allow reciprocal tariffs - massive duties on countries with high tariffs, like India and China.

Irwin says the real risk is that in the long term, Trump's policies could trigger a domino effect, toppling the rules-based trading system, making commerce more po‐ litical and less predictable and leading to tit-for-tat re‐ taliation. He says countries that rely most heavily on the U.S. for trade are the most vulnerable.

"You're right to be worried in Canada."

Benoit takes the opposite view. If Trump managed to enact his entire agenda, with the biggest tariffs on Asia, he says Canada would enjoy a renaissance in manufactur‐ ing.

Instead of reflexively op‐ posing some of these poli‐ cies, he says Canada should offer to team up with Trump to impose similar against China.

"Canada should say: 'We're with you. We're walk‐ ing shoulder to shoulder with you,' " Benoit said. tariffs