PAINFUL TRUTH: Canada faces Trump tariffs

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Media reports as far back as July have suggested that Canadian government officials were already reaching out to Republicans and those in Donald Trump’s inner circle.

The fear is economic.

Trump, the once and possible would-be-again U.S. president, has promised repeatedly that he will bring in universal tariffs if elected – at least 10 per cent, and in some of his public comments, he threatens as high as 20 per cent.

If he manages to get enough support in the U.S. Congress to push through such measures, the effects for Canada would be somewhere between “bad” and “disastrous.”

First of all, consider how much we export to the United States. Car parts, agricultural products, lumber, oil and gas, all sorts of things would immediately get more expensive for American customers. They would respond, in many cases, by buying less, which would hit some Canadian firms hard. Some would cut jobs, others would go bust entirely.

Then, there’s the flip side. Canada – and countries in Europe, Asia, Latin America, and Africa – are not going to stand idly by. There would be retaliatory tariffs.

So at the same time that our exporters would face a shrinking customer market south of the border, Canadian consumers could expect to pay more for imports. Everything from fresh fruit and vegetables from California to cars and trucks, industrial machinery, plastics, electronics and appliances would suddenly get more expensive for us.

In turn, that would cause rising inflation, just as we’d seen it get down to normal after several brutal years. And to fight that inflation, interest rates would go back up. But this time, they’d be rising at a time of growing unemployment because of the tariffs’ impact on jobs.

Is this likely? If the U.S. Congress had to sign off on the deal, it would be mere bluster from Trump. There’s not a majority to be found among the members in either the Senate or the House for starting a trade war with the entire world.

But the fear is that Trump would use the International Emergency Economic Powers Act, a piece of legislation that gives the president broad powers during a “national emergency.”

No doubt that would be challenged in the courts. But even successful court challenges take time, and a few months of high tariffs can still do damage.

Which is why Canadian officials are trying to reach out to Trump’s associates, to see if Canada could be exempted from any future tariffs.

It might happen. But even if Canada is exempted, or only faces lower tariffs, we’d still be hit by the economic shockwave.

The last half century has seen a wave of trade deals that rolled back tariffs. Free trade was the order of the day. Not all the effects of this movement were positive – the mass offshoring of manufacturing jobs has been particularly damaging to many communities across North America.

But if the U.S., the largest economy on the planet, suddenly throws up tariff walls, and is hit with retaliation by every other country and trading bloc in turn, it’s going to upset a lot of apple carts.

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PAINFUL TRUTH: Canada faces Trump tariffs

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