Canada’s retaliatory salvo in the trade war, announced from a Stelco plant in Hamilton on Friday, might as well have been staged with marching bands and maple leaf banners. Two days before Canada Day, there was a lot of flag-waving sentiment. But this was digging in for a long haul.
The retaliatory tariffs on steel, aluminum, and items from tablecloths to toilet paper, Foreign Affairs Minister Chrystia Freeland told us, were levied more in sadness than in anger. There was an appeal to national solidarity as she announced there’d be $2-billion in federal support for workers and businesse who suffer from U.S. duties. The Canada Day weekend message to stick together was a signal that the government thinks this trade war will last a while.
And on Sunday, U.S. President Donald Trump told us that’s exactly what we can expect.
He told interviewer Maria Bartiromo that he’s waiting till after the U.S. midterm elections in November before he completes a deal on a renegotiated NAFTA – seen as the way to end the current tariff war. He again floated the possibility he’d spark a more damaging trade war by imposing stiff tariffs on cars, which would have a grave economic impact.
It was one of those almost-funny moments where Mr. Trump’s messages mixed so badly. A day before, the President and his ambassador to Canada, Kelly Craft, had issued warm messages of friendship for Canada Day. Then Mr. Trump casually told Fox News he wants a trade war of attrition that threatens to push Canada into recession.
With Mr. Trump, there’s always the possibility that he could swing dramatically the other way in a week. Remember how he initially welcomed Prime Minister Justin Trudeau with the message that in Canada’s case, NAFTA only needed a little tweaking? But don’t expect a quick reversal now.
Even before his Sunday appearance, some Canadian government figures felt Mr. Trump would not lift steel and aluminum tariffs before the U.S. mid-terms, and that Canada is probably in a standoff till 2019. At worst, an escalating trade war will cause deep hurt in the Canadian economy.
Sure, Ms. Freeland has taken to saying that she’s confident that common sense will prevail, but it’s the kind of phrase that doesn’t promise that will happen anytime soon.
Mr. Trump no longer talks of tweaking; he blames Canada. His rhetoric about trading partners has become unchained -- complaining, for example, that European Union trading practices are more unfair than China’s. He’s keeping the rhetoric machine whirring for a broad tariff war.
After Friday’s announcement, Canadian government officials have been keeping an even closer eye on the Twitter account of @realDonaldTrump. It would hardly be surprising if the President issued threats of new tariffs.
Retaliatory tariffs like the ones that Canada announced Friday rarely lead to a quick reversal. They mark the start of the war of attrition. Canada tries to make the U.S. feel pain, knowing that each time the U.S. ups the ante, this country gets hurt more. There are others retaliating, like the EU and Mexico, and there will be a cost to U.S. farmers and businesses. But U.S. economic growth has been fairly strong, and Mr. Trump’s tax cuts are boosting investments. The U.S. President feels he can wait a while to see how the war of attrition goes.
In the meantime, Mr. Trudeau and Ms. Freeland are praising national solidarity. At a Canada Day event in Leamington, Ont., Mr. Trudeau referred to it as a kind of national virtue. “This is who we are, we’re there for each other in times of difficulty, in times of opportunity,” he said.
That’s why it wasn’t just the $16-billion in retaliatory tariffs that mattered in Friday’s announcement. The $2-billion for workers and businesses was crucial to the Canadian-solidarity message.
Politically, Mr. Trudeau’s government has embraced endorsements of Team Canada from Conservatives, including Leader Andrew Scheer – and you can bet they will attack criticism of their handling of the trade war as disloyal to Canada.
And now, instead of the refrains about working hard at the negotiating table, Ms. Freeland is telling us common sense must prevail one day. The government’s message of national solidarity is to prepare Canadians for the idea this trade war will hurt, and it could hurt for a while.