It’s a “tragedy” if U.S. President Donald Trump continues on his course toward a trade war, says Republican Senator Orrin Hatch. House Speaker Paul Ryan strongly opposes Mr. Trump’s proposed tariffs on steel and aluminum imports. Former U.S. treasury secretary Lawrence Summers says the plan represents “probably the most irrational economic policy that any President has ever introduced in the last half-century.”
In the firestorm over Mr. Trump’s latest leap of logic, Canada has most everyone on its side; congressional opinion, pundit opinion, expert opinion in the form of economists by the score.
All that, however, is unlikely to make Mr. Trump stand down from his protectionist plan. The only way he’ll drop the tariffs – and it’s a cagey negotiating ploy – is if Ottawa caves on a number of American demands in the unresolved negotiations to revamp the North American free-trade agreement.
This is a President not deterred by the potentially ruinous prospects of a trade war. Trade wars are fine, he says.
He also reasons he can politically benefit. But there’s a way for Ottawa to respond that will disabuse Mr. Trump of that notion and that will drive him – if he already isn’t there – bonkers. Mild retaliatory warnings won’t do. Threats of tariffs on California wine won’t work. The Democrats own that state. He doesn’t care. Levies against Kentucky bourbon? His Republicans own that state. He doesn’t care.
You have to threaten him, says former free-trade negotiator Gordon Ritchie, with retaliatory measures that inflict real political damage. “Go after the swing states,” he says. Send Mr. Trump a message that if he persists with his plan, Ottawa will target imports from Pennsylvania, from Ohio, from Wisconsin, from Florida.
They are all states that are critical to his political prospects. They are heavily dependent on Canadian trade whether it be in machinery, metals, pharmaceuticals or agricultural products. Canada, which is the leading export destination for 38 states, is Florida’s No. 1 economic partner. Measures could be taken such as changes to tax rules for snowbirds “that would be a real gut punch,” says Mr. Ritchie.
One motivation for Mr. Trump’s import tax is the Pennsylvania special election for a congressional seat next week. He also has to fight midterm elections this fall. He knows that protectionism can work at the polls. Richard Nixon scored nicely in public opinion in 1971 when he made the jarring announcement of an across-the-board 10-per-cent import surcharge.
Specified retaliatory threats from Ottawa need to be made quickly, before Mr. Trump formalizes his import levy lurch. For NAFTA negotiations, if Mr. Trump is going to use ploys, Ottawa has to use them, too. The idea of such a proposed retaliation – fighting dumb with dumb in that, if applied, Ottawa tariffs would hurt domestic interests as well – would be to show right away that in this type of warfare everyone gets burned. That would hopefully prompt compromise on the trade standoffs.
A show of tougher Canadian resolve might help spur Congress to stop Mr. Trump. Though the President has the authority to negotiate international trade agreements, the Constitution grants Congress power “to regulate commerce with foreign nations.” A 1962 trade law that allows the President to impose tariffs if required by national security is cited as the basis for his measures. But in the case of Canada, a long-time ally and defence supporter, it is a demonstrably specious contention.
Mr. Hatch and Mr. Ritchie say that Mr. Trump has been taken in by antediluvian trade adviser Peter Navarro, whom Mr. Ritchie says is “the most disrespected pseudo-economist in the United States.”
In the annals of bilateral relations, it is hard to find examples of a presidential action so shoddily conceived as this one. It wasn’t thought out. It was blurted out. On national security it makes no sense. On trade deficits (with Canada there is none) it makes no sense. On China, purportedly the chief target, it makes no sense in that it hurts American allies more.
But such arguments are not going to win over a President who for decades has had a bee in his brain over his country supposedly getting hosed by trade deals.
What will give him pause is if Ottawa retaliates in a way that triggers political pain. “The best defence is a strong offence,” Foreign Minister Chrystia Freeland said last year. Now is the time for her to make good on the proposition.