Carlo Dade
Published in the Globe and Mail
November 27, 2024
Carlo Dade is director of trade and trade infrastructure at the Canada West Foundation.
To stop and think before acting is generally good advice but particularly when dealing with Donald Trump and his social-media posts.
The president-elect shocked many in Canada and Mexico this week by saying he’d impose 25-per-cent tariffs on their exports, unless both countries deal with what he called drug and border-security issues.
For Canadian leaders, the rush to act in the face of the news cycle and the pressure from businesses and voters who don’t typically follow trade news is immense. However, with Mr. Trump, a rush to act or respond is a rush to misunderstand, misinterpret and make mistakes.
Is the 25-per-cent tariff serious? Will Mr. Trump be satisfied with any action Canada takes on fentanyl? What, if anything, does he specifically want to see on migration at the border?
Or is it the case, as some observers say, that the tariff threat is an opening salvo to take apart the world’s liberal trading order and put in place a more transactional economic system?
Once again, we do not know. We are back to Mr. Trump’s first term, when the tweet of the day hung over us like the tweet of Damocles. We’re inclined to toss everything we can think of on the table to appease someone who probably does not know what he wants until he sees it.
What we do know is this: Creating panic and desperation is Mr. Trump’s second-favourite negotiating trap. Canadian premiers have already fallen for his first favourite negotiating trap: Divide and conquer. Last week, Ontario Premier Doug Ford said he and his provincial counterparts agree that we should cut Mexico out of North American free trade to save Canada’s relationship with the United States.
Now we see that attempt to differentiate Canada from Mexico failed to win us any respite from being lumped together on the tariff announcement. Instead, it only alienated a potential ally, the only one we may have for some of the fights that lie ahead.
To panic and to rush to action and speech would be to make a second serious miscalculation in as many weeks in dealing with the incoming administration.
What we can do is sharpen our understanding of some of the emerging lessons from a new Trump administration to formulate our response.
There was some hope initially, from me and my colleagues at least, that think tanks staffed with former Trump officials – such as Robert Lighthizer and Peter Navarro, who had drafted detailed tariff plans – and leaders of the new conservative populist movement in the U.S. would provide some degree of direction and predictability to a new administration.
Looking at the appointments that Mr. Trump has made so far, this may still hold true for some portfolios, such as agriculture, education and housing. But not for areas where the president-elect has a personal interest. These include justice, defence, energy and, unfortunately, trade.
Then there is the fact that this state of play may change. As we saw in Mr. Trump’s first administration, then-commerce secretary Wilbur Ross, a more orthodox businessman, was at first in charge of trade policy until being replaced by Mr. Lighthizer, then-U.S. trade representative. This time, Mr. Lighthizer is not around, and we have to see how the new team develops.
So, how do we respond?
Step one is to stop walking into obvious traps.
That starts with Mr. Trump’s favourite trap, divide and conquer. It’s not just about Mexico. At home, bickering among political parties and levels of government is to hand Mr. Trump the keys to Canada. The political-campaign and consulting class must come to its senses and realize that whether its interest wins out over national interest will determine our future under Mr. Trump.
Canada could survive the loss of the North American trade agreement where, according to the Canada West Foundation’s calculations, tariffs would rise 2 or 5 per cent on about half of what we export to the U.S. But for a country that relies on trade for two-thirds of its GDP, a 25-per-cent tariff on 77.4 per cent of everything it exports is an existential threat.
With foreign partners (or frenemies) such as Mexico, we need to choose when we work with them and when to distance ourselves from them, instead of Mr. Trump dictating this and dividing us to suit his, not our, needs. These decisions have to be made strategically, not in panicked responses delivered in campaign-style photo-op announcements.
Finally, we must keep in mind that the Americans cannot keep tariffs in place forever. A domestic political backlash will eventually break out, and the struggle then becomes one of national wills.
We are at a moment when we can no longer afford excuses for putting party above country. This starts at the top but falls to every level of government and opposition.