Canada’s former ambassador to the United States says he is confident Ottawa can avoid the worst of the tariff threats proposed by US President-elect Donald Trump, but that Canada will not emerge completely unscathed.
Frank McKenna, now a vice president at TD Securities, said he believes the incoming president is looking to use tariff money to reduce U.S. taxes, but that Trump’s 25 percent tariff is likely “a throwaway number” intended to act as a negotiation tactic. before his inauguration.
“If you were to actually impose 25 percent tariffs on all Canadian products and all Mexican products, that would be enough to precipitate inflation in the United States of America and would likely cause a rise in the dollar, which would undermine what you are trying to do.” do. McKenna told Global News.
“There’s a chance we could end up with 10 percent tariffs in the short term until we can figure it out, but no, I don’t think we’ll end up with 25 percent tariffs in January.” 20.”
If Trump makes good on his threat, federal officials as well as premiers and trade groups have said it would wreak havoc on Canada and the United States, with more than $3.5 billion in goods and services crossing the border daily.
“It is impossible to raise tariffs to a significant degree without harming American and Canadian businesses,” according to Greg Husisian, a partner at Foley & Lardner who chairs the law firm’s international trade and national security practice in Washington.
To avoid the worst-case scenario, McKenna says Canada needs to conduct public diplomacy and private negotiations, which are already underway.
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And despite Trump’s attacks on Prime Minister Justin Trudeau calling him the “governor” of the “great state of Canada,” McKenna believes there is hope for a deal.
“Contrary to what some people might think, Trudeau and Trump actually have a good personal relationship,” he said.
McKenna, the former premier of New Brunswick, also urged Canadian officials to avoid repeating Trump’s narratives.
“I would like (the prime ministers) not to amplify American accusations at the border, for example, regarding suspected drugs or migration, etc. “It wouldn’t be helpful if Canadians ended up supporting Trump’s arguments,” he said.
A claim Trump frequently makes is that the United States is “subsidizing” Canada’s economy. But as several trade experts explained to Global News, the reality is that the United States has a trade deficit with Canada.
“(Trump) views trade surpluses and deficits as gains and losses,” Husisian said. “Which ignores the fact that yes, we are giving you money, but you are giving us goods.”
“I don’t have a trade deficit with Wal-Mart because I am giving that money, because they are returning goods to me,” he added. “That doesn’t mean it’s subsidizing Wal-Mart.”
If negotiations are not fruitful, McKenna said Canada will have to respond with retaliatory tariffs. But he is still hopeful that the United States will abide by the law outlined in the United States-Mexico-Canada Agreement, which Trump himself negotiated during his previous presidential term.
“We’ve signed, sealed and signed agreements under NAFTA, now called CUSMA, saying we’re not allowed to do any of these things, so we’re on the right side of the law on this,” McKenna said. “The United States would be breaking the law if the (tariffs) go ahead.”
While Husisian agrees that a 25 percent tariff would be a “total violation” of the agreement, that probably won’t be enough to deter Trump.
“Unlike most situations where you look and say, ‘What do the rules allow the government to do here?’ You have to look and say, ‘Well, what could the president do if he doesn’t care so much about the rules?'” Husisian said.
“I think that’s what’s partially driving this,” he added. “He’s salivating over the fact that the [CUSMA] The review will give him even more leverage to pressure Canada.”
The first joint review of the CUSMA trade agreement, which Americans refer to as USMCA, is scheduled for July 1, 2026, which could nullify any tariff violations under the existing agreement when they reach court.
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