Less than two weeks into his new term of office, United States President Donald Trump has up-ended the North American economy by threatening to slap a 25 per cent tariffs on Canadian and Mexican goods. While a 30-day reprieve has been given as officials negotiate, if this threat becomes a reality, it will be the opening salvo of a trade war that will be extremely detrimental to the Canadian economy.
Tariffs on Canadian goods and oil will hit the pocketbooks of Americans nearly immediately as they are a tax on the importer of said goods, paid for and passed on to the American consumer. While Canadian companies will not have to pay those tariffs, those businesses will suffer under the proposed tariffs nonetheless. Canadian products will become less competitive in the US market. It will reduce our gross domestic product, and potentially cast this country into a recession; a trade war has implications for every Canadian.
Any retaliatory tariffs by Canada will increase the cost of US imports, which will impact prices at grocery and retail stores. The Canadian dollar will decrease in value on the currency market, and we may see interest rate changes if inflation rises or the economy falters. Reduced sales to the U.S. may mean layoffs, or even business closure. The impact of any trade war will be felt locally. Our largest employer, Ross Video, ships extensively into the United States, as does Eckel Industries, Xenopus, and Evonik. The job losses could be catastrophic to the local, regional, provincial, and national economies. With one signature, Trump could abrogate a modern trading relationship that is nearly 40 years old.
To be clear, we have been warned since the signing of the original Free Trade Agreement that Canada is too reliant on American trade. In the era of post-Cold War global trade agreements, we needed to diversify our trade relationships with new opportunities and new markets. Instead, our trade with the US only intensified, growing from 75 per cent in 1988, to the 83-87 per cent range within two decades. Now our economy may reap what decades of inaction has sown.
During a 1988 federal election debate, then Liberal leader and former Prime Minister John Turner countered then Prime Minister Brian Mulroney’s support of the Free Trade deal saying that for 120 years, Canada had resisted the continental pressure of the United States. “You reversed that. You’ve thrown us into the influence of the United States and will reduce us, I’m sure, to a colony of the US because when the economic levers go, the political independence is sure to follow.
Right now, leadership is needed from our federal and provincial governments to help stick-handle the impact of these tariffs. Instead, we have a long-overdue federal leadership race for the governing Liberals; and a ill-timed provincial election in Ontario. This, combined with disparate regional views, means that we have a less-than-unified approach to deal with whatever demands will be made to end the tariffs. A 30-day delay in Trump signing in tariffs does not mean the deal is done, or that all is well.
If these first two weeks of Trump’s term in the White House have shown anything, it is that the next four years are going to be challenging and volatile for anyone who is friends of the United States. With friends like that, who needs enemies?
Discover more from Morrisburg Leader
Subscribe to get the latest posts sent to your email.