Jan 04, 2017 11:54AM EST – If Trump follows through with tweets on Mexico and China, it won’t be good for Canada | published: Jan 03, 2017 5:55PM EST
When Donald Trump rants against Mexico or China, he puts Canadian jobs at risk. Tuesday was particularly risky.
By tweet-slagging GM for selling Mexican-made cars into the U.S., as the president-elect did Tuesday, and by appointing Robert Lighthizer, a China-basher, as United States trade representative, Mr. Trump reinforces his determination to bring American manufacturing jobs home, even at the risk of launching a global trade war that could damage both the American and Canadian economies.
“It’s going to be a scary, scary ride,” predicts Gordon Ritchie, who was part of the Canadian team that negotiated the 1989 Canada-U.S. free-trade agreement. Canada, China and Mexico are the United States’s three biggest trading partners. If Mr. Trump riles up the other two, it can’t possibly be good for us.
As University of Ottawa political scientist Roland Paris tweeted on Tuesday: “Even if Canada isn’t directly targeted, there’s no denying risk of collateral damage from Trump’s economic policies – and stakes are high.” Prof. Paris served briefly as Justin Trudeau’s foreign-policy adviser, and it’s a safe bet that the Prime Minister’s Office is equally concerned.
Let’s not forget the many different ways a Trump administration could be bad for the Canadian economy.
The president-elect wants to lower corporate taxes, which could eliminate the Canadian corporate tax advantage won through a decade of reductions.
He sneers at efforts to combat global warming, which means the Trudeau government’s national carbon tax, however it is administered by each province, will reduce the competitiveness of Canadian industries.
And, as my colleague Laura Stone reports, the Trump transition team says the president-elect has put preserving American jobs above all other priorities, which means renegotiating the North American free-trade agreement will be front-and-centre after the Jan. 20 inauguration.
That will also mean tough negotiations on softwood lumber, most likely an expanded Buy American government procurement program that freezes out Canadian competition and, most dangerous of all, the threat of a 35-per-cent penalty on goods entering the U.S. from American-owned manufacturers.
The purpose of that tariff would be to prevent American companies from moving operations to Mexico and elsewhere to take advantage of lower wages. But would it also apply to goods entering the U.S. from American-owned companies with operations in Canada?
Common sense says no. The two economies are inextricably intertwined. As Mr. Trudeau observed in a YouTube video that was released Tuesday in which he and U.S. Ambassador David MacNaughton welcomed members of the new Congress, “American and Canadian business work closely together to develop and sell our products to the world.”
But it is difficult to gauge the common-sense quotient of the incoming administration. Mr. Lighthizer will work in concert with Wilbur Ross, Mr. Trump’s nominee for commerce secretary, who also wants to confront China on trade.
The incoming administration accuses Beijing of manipulating the Chinese currency and other measures to encourage Chinese imports and discourage American exports. If Mr. Trump imposes tariffs on Chinese imports in punishment, and Beijing retaliates, then the foundations of the global trading system and the World Trade Organization will be at risk, threatening the economy of this trading nation.
And don’t count on Congress to rein in the new administration. The American president has broad powers to impose temporary sanctions that could take years for Congress to overturn, if it so chooses.
The Liberals have pursued a prudent path of promising to work with the new administration and Congress to improve the Canada-U.S. trading relationship, even as they pursue and ratify trade agreements with Europe and Asia.
But ultimately, like everyone on both sides of the border, the Canadian government can only watch and hope that the new president doesn’t live down to his tweets.