Trade bully isn’t gone for good
The thing to do with Donald Trump is to remember it’s just a movie.
Movies end. The lights go up, and you shake your head wondering what all that was about.
On the first day of this month, the U.S. president threatened to impose a 25-per-cent tariff on imported steel, and a 10-per-cent duty on U.S. aluminum imports. No countries, Trump repeatedly and emphatically said, were to be excepted.
Trump’s shocking attack was directed at U.S. allies and potential adversaries alike, from the European Union to China, and from Mexico to Hamilton, Ont.
But just seven days later, Trump flipflopped. Exceptions would be made, after all, for Canada, Mexico and perhaps some other U.S. allies.
Yet Trump is a diehard protectionist who won office in large part by scapegoating trade deals, and he’s not about to stop.
Canada, Mexico and America’s other trading partners aren’t in the clear. And not just because Trump’s attacks on the likes of Canadian softwood lumber and Chinese solar-panel technology remain outstanding.
More on that in a moment. First, what accounts for this week’s astonishing Trump turnaround? And what does it say about the presidential administration of a country upon which Canada relies so heavily for its prosperity?
Trump’s steel and aluminum pronouncement March 1 was impetuous, an erratic president making policy off the top of his head. Trump immediately got an earful about a threat widely regarded as moronic from the U.S. Chamber of Commerce, the EU, the International Monetary Fund, the World Trade Organization (WTO), heads of state of the U.S.’s closest allies and Trump’s fellow Republicans, including the leadership of the Republican-controlled Congress and Senate.
Add to that a consensus of U.S. economists, stock-market investors who dumped stocks on U.S. and international bourses fearing that Trump was igniting a global trade war, the United Steelworkers and the 114 member companies of the U.S. Aluminum Association. That’s a partial list.
Trump’s proposed tariffs on steel and aluminum would have increased prices for American consumers, who would pay more for autos, appliances, houses, canned goods, even beer and soft drinks packaged in aluminum cans. The U.S. National Retail Federation labelled Trump’s latest proposed tariffs a “tax on American families.” The day before he backed down, Trump received a letter from 107 Republican members of Congress urging him to scrap the sanctions rather than damage the U.S. economy. That was a few hours after Trump’s top economics adviser, Gary Cohn, abruptly quit, having lost his bid to dissuade Trump from risking a trade war with his most recent threatened tariffs.
As it happens, the U.S. steel industry is robust, not an obvious candidate for protectionism. And it employs only 140,000 people. By contrast, U.S. industries that buy steel, the price of which was poised to jump overnight by onequarter, employ about 6.5 million Americans. Using the methodology of Trump’s own Commerce Department in calculating tariff impacts on employment levels, the U.S. Trade Partnership Worldwide LLC economic consulting firm said this week that America would suffer a net loss of nearly 146,000 jobs if Trump’s latest tariffs were imposed.
In initially failing to exclude Canada, Trump went too far. It was, of course, a bargaining tactic, but backfired in enraging Ottawa rather than coercing it. Trump was setting Canada up for a choice between capitulation to new trading conditions unfavourable to Canada and rejecting U.S. demands to preserve its dignity. After all, his position on Canada was preposterous. Canada runs a trade deficit in steel with the U.S., because Canada buys a whopping 50 per cent or so of U.S. steel exports. Trump cited nationalsecurity concerns as his rationale for bolstering U.S. steel producers. Yet America’s biggest source of imported steel is Canada, an American partner in NATO and Norad, and no more of security threat to America than Winnie the Pooh. China accounts for just 2.4 per cent of U.S. coal and steel imports.
“Trump is punishing our most important trading partner in the middle of a (North American Free Trade) negotiation that he claims will result in a much better deal,” the Wall Street Journal said March 1, in an acidly critical summation of Trump’s trade policy.
“Instead, he is taking a machete to America’s trade credibility. Why should Canada believe a word he says?”
By Wednesday of this week, the EU had approved a list of U.S. imports targeted for retaliation if Trump’s latest tariff threats were implemented. In Ottawa, a plan for tariff retaliation targeted at the “swing states” that determine the outcome of presidential contests was gaining momentum. Ontario Premier Kathleen Wynne already has a retaliation plan in place.
Trump has caved, so why worry?
Trump’s mistaken belief that U.S. trade deficits diminish America’s prosperity remains intact. And he has yet to deliver to his political base on this signature issue. America’s trade deficit has significantly worsened in the 13 months since Trump took office. And none of the net U.S. job creation in that time can be credited to Trump’s trade policy.
Under the spell of an antitrade Rasputin named Peter Navarro and other rabid protectionists in his administration, Trump has tweeted that China, the EU, Japan, South Korea, Canada and just about every region of the planet has been “ripping off” the U.S. “for years and years.”
Trump’s about-face this week disguises the fact that the war between the fierce protectionists and so-called globalists in his White House has likely ended. Cohn’s resignation signals that the protectionists have won, at least for now.
Trump remains determined that his negotiators strong-arm Canada and Mexico into acceding to an “America First” NAFTA. Navarro this week said the trade-sanction exceptions for Canada and Mexico will be short-lived if a new NAFTA acceptable to Trump isn’t forthcoming.
Still, it’s now evident that Trump can be made to back down. And that the average high-school science project is undertaken with more knowledge of facts and implications than policy-making at the Trump White House.
It helped that a frustrated Trudeau government, in January, filed a sweeping complaint with the WTO against the multitude of America’s unfair trade practices. That got the Yanks’ attention. The unusual move shocked a U.S. NAFTA negotiating team that can’t stop talking about what it regards as an act of Canadian hostility.
Last month, Justin Trudeau went further, downplaying the importance of NAFTA. “We aren’t going to take any old deal,” Trudeau said. “Canada is willing to walk away from NAFTA if the United States proposes a bad deal. We won’t be pushed around.”
And Trudeau rejected the latest Trump outrage by simply calling the tariff threat “unacceptable.”
In the foreign-affairs realm, “unacceptable” allows for no discussion on the matter, no compromises, no concessions. It’s the diplomatic way of slamming the door in a bully’s face.
This time, the bully lost. But we’ll have to stand up to him again.