Traditionally, Canadians and Americans have held a tight-knit relationship, no matter the party lines held by either the Canadian Prime Minister or the American President. That is another relationship being damaged by President Trump, along with the relationships with other key allies like Mexico and the European Union. His disdain and indifference to the importance of these important national security relationships showed yesterday, when the United States imposed tariffs on steel and aluminium imports from Mexico, Canada and the EU.
The three parties had been granted an exemption from the tariffs, which were officially imposed in late March and had generated a large cause for alarm back then even at the idea of a global trade war. The idea seems to be turning into reality, because Mexico, the EU and Canada are already planning retaliation against the US. The EU has threatened, and probably will impose, duties on $3.3 billion of US exports of products such as motorcycles, jeans and whiskey. Canada promises to match the US tariffs “dollar for dollar” on steel and aluminium. And Mexico says it will place taxes on US exports of steel, pork, fruits and other farm goods. This could be the first step in a rapidly escalating trade war. For Mexico and Canada, this adds another hurdle in the already contentious NAFTA negotiations.
The rationale given for the tariffs are “national security” reasons. Facts would show that this is completely absurd. The US military demand for steel and aluminium is small, representing only 3% of domestic demand. More importantly, the three parties are supposed to be close allies, especially Canada. The Trump administration is deliberately damaging ties to “win” on trade – even though it has a trade surplus with Canada, according to US data.
Prime Minister Justin Trudeau did not hold back against the administration, for the rationale that Canada is a national security risk for the United States. Trudeau basically said that this argument is an insult to the Canadian soldiers who have fought with American ones for decades, the soldiers who came to America’s aid after 9/11 and are still fighting in Afghanistan almost two decades later. The tariffs hit Canada hard: it sells the U.S. more steel and aluminium than anyone else, in part because of deeply integrated auto and defence sectors.
Trudeau’s frustration led him to reveal that a meeting between him and Trump on NAFTA talks had been imminent because there was possibly a deal within reach. Then Vice President Mike Pence intervened and added a condition to the meeting: Canada had to agree to a sunset clause in NAFTA, meaning that the deal would have to be renegotiated every five years or else be terminated. Trudeau refused and the meeting never occurred.
The trade move does not make sense. By placing tariffs on its allies, not only is the US isolating itself, but it is actively harming its own consumers. Even the association that represents the steel industry came out against Trump’s tariffs. The US economy is healthy right now, but if there is a global trade war, it will be Trump’s own supporters who would be hurt the most. The moves on trade and NAFTA represent a growing isolation for the Trump administration, which went against the advice of its allies on the Iran deal and the decision to move the US embassy in Israel to Jerusalem.
If there is a national security crisis, the US is rapidly running out of allies who would want to assist actively. Maybe Trump has not thought through the consequences of a major trade war or alienating the closest allies of the US. His Republican allies in Congress have though, such as Senators Ben Sasse of Nebraska and Pat Toomey of Pennsylvania. Besides the hard right hawks on trade such as Steve Bannon, the Republican party is supposed to be for free trade. Yet, there will be no action taken by Republican leaders Paul Ryan & Mitch McConnell.
Trump does not seem to exhibit the ability to learn from his mistakes. Retrospectively, this may come to be one of the biggest mistakes of his presidency if it harms the US economy, one of the areas where he exhibits the strongest approval.