With Donald Trump's threats of 25% tariffs hanging over us, Canadian politicians, economists and businessmen are arguing among themselves over the best retaliatory tariffs to levy back against our largest trading partner, the USA. But everyone seems agreed that retaliatory tariffs are in fact the way to go, indeed the only possible way to go.
What if they weren't? I know it's economic heresy, but I can't help wondering whether we have fully thought this through. And finally I came across another heretical article in the Globe and Mail asking the same question.
Many commentators have leveraged the 2018 experience, when Trump levied tariffs on Canadian steel and aluminum exports and Canada hit back with a tit-for-tat retaliation, resulting in the American tariffs being lifted and new agreement struck on steel and aluminum. But it didn't have to end that way, and there is no guarantee that it would end that way a second time, particularly when dealing the ever-mercurial Trump. And we still ended up with a worse deal on steel and aluminum than we started with. The Globe article offers some alarming counter-examples from recent years.
Trump just uses tariffs of this sort as a bully tactic, just one part of his weird negotiating technique. If we retaliate, we hurt our own economy even more, just as the American economy is hurt by Trump's tariffs. Do we really want to voluntarily saddle ourselves with this double whammy? Nothing we do to America has the power to hurt them anything like as much as we are hurt ourselves, despite what a belligerent Doug Ford says. I'm sorry, but we are not going to somehow bring American to its knees.
Maybe we just need to ride out the Trump years, much as we rode out the COVID pandemic, by strengthening our social safety net and rebuilding our infrastructure, as the article suggests. (Trump is a pest very similar to a nasty virus). It won't be easy or cheap. But if we impose retaliatory tariffs, we would still have to ride it out, in addition to the harm it does to our own economy.
And, of course. there is no guarantee that any of it will change Trump's mind one iota. Trump doesn't really understand tariffs very well, despite it being the main single plank of his plan for economic trade. He seems to think that tariffs are paid by the other country (Canada, Mexico, China) and that they represent basically free money for the US. (In fact, American tariffs are paid by Americans, as people hav been telling him for years.) But Trump is not a logical being. What he is is vindictive, and our tariffs may well invite more (and potentially worse) retaliatory retaliations.
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