Skip to main content

Maybe you're feeling smug about Donald Trump's chaotic start to the new year.

Things are not going particularly well for the unpopular U.S. President. There's his feud with former adviser Steve Bannon, awkward revelations in Michael Wolff's gossipy new book about the Trump White House and reports that special counsel Robert Mueller wants to talk to Mr. Trump as part of the Russia investigation.

But there is a downside for Canada in all this turmoil. Mr. Trump's mounting political and legal troubles may prompt him to seek comfort in one of his favourite pursuits: bashing trade partners.

Story continues below advertisement

Like a cornered dog, Mr. Trump is ready to bite.

The U.S. administration is apparently plotting the elements of a broad trade crackdown, with the details expected to be laid out in the State of the Union address at the end of the month, according to a report this week in Politico. The President is also heading this month to the World Economic Forum in Davos, Switzerland, where aides say he will push his "'America First' agenda with world leaders."

If Mr. Trump wants to turn the protectionist rhetoric into action, he has plenty of options. He can trigger a pullout from the North American free-trade agreement, a tariff war with China or a showdown with South Korea over vehicles. The Trump administration must also decide shortly on a spate of product-specific sanctions targeting imports of aluminum, steel, solar panels and washing machines.

Canada's recent experience suggests the United States is ready to play rough. The Trump administration has taken a hard line in disputes over softwood lumber, newsprint and Bombardier's C Series aircraft.

Protectionism is fertile ground for Mr. Trump. It plays well with his voter base, particularly among isolationists who blame free trade for the demise of factory jobs.

And it's relatively easy to do. There is a lot Mr. Trump can do on the trade front without the U.S. Congress's blessing.

But he also risks angering many in his own Republican Party, who are urging him to take a less aggressive stance.

Story continues below advertisement

Robert Zoellick, a U.S. trade representative under president George W. Bush and a former president of the World Bank, worries that 2018 will be the year that U.S. trade policy defines Mr. Trump's "fearful" United States.

"The Trump administration has stacked up a pile of trade cases that will come tumbling down in 2018," Mr. Zoellick warned in a recent op-ed in The Wall Street Journal. "More important than any single case is the signal of a strategy of economic defeatism."

Mr. Trump likes to portray the United States as the world's biggest loser on trade – based mainly on the fact the country runs a hefty overall merchandise trade deficit. And he's determined to tilt the scale back in the country's favour by bullying trade partners into accepting concessions or unilaterally punishing them with steep tariffs. In the case of steel and aluminum, for example, the Trump administration is threatening to invoke a rarely used national-security law to block imports.

The risk of Mr. Trump making good on his protectionist threats raises some troubling questions for the global trading system and the economy.

Unilateral action by the United States against China and others will inevitably invite retaliation, raising the spectre of mutually destructive trade wars. The United States may also find itself increasingly in violation of World Trade Organization rules – a point underscored by Ottawa this week in a new case alleging systemic violation of WTO rules in its handling of almost 200 anti-dumping and subsidy investigations.

There is still a significant risk Mr. Trump will move to withdraw the United States from NAFTA – despite telling the Journal this week that talks are "moving along nicely" and that he's willing to give negotiations more time.

Story continues below advertisement

The larger concern for Canadians is the damage all this protectionism may do to the economy.

For the moment, Canada's economy looks pretty healthy. Job growth is strong, unemployment is at its lowest point since the 1970s and companies are running flat out. The U.S. economy is in even better shape, buoyed by the massive tax-cut package that Congress passed in December.

The continued climb of global stock markets suggests investors see no end to the good times.

That view seems naive, given the mounting trade risks. Protectionism poses one of the greatest risks to global economic expansion.

And few countries are more vulnerable than Canada to an increasingly isolated United States.

Report an error Editorial code of conduct
Comments are closed

We have closed comments on this story for legal reasons or for abuse. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter