President Donald Trump launched the U.S. into a new trade war with Canada over the weekend, an act he may think makes him look mighty, but in fact exposes his weaknesses as a dealmaker and sets the U.S. up for completely gratuitous economic pain.
Trump twice promised last week that a trade deal with Canada was imminent. But late on Friday, those talks collapsed. On Saturday a raft of 50% tariffs on Canadian goods went into effect, including on plywood, alcohol and dairy products.
Canadian Prime Minister Mark Carney’s response on Saturday was forceful. He said that Canada was “at war” with the U.S., lamented that “America has changed” and promised “dollar for dollar” retaliation.
Canada has not yet released the list of U.S. goods it will hit, but it has plenty of options.
Why did the talks fall apart after seemingly getting so close to working out? Each side has accused the other of introducing last-second demands that undermined the spirit of the talks. (City University of New York economist Paul Krugman suggested that Canada has more credibility in its account: “Does anyone seriously doubt that Canada, not the Trump administration, is telling the truth?” he wrote on his Substack.)
Part of what likely contributed to the unpredictable 11th-hour behavior from the U.S. is reported disunity within the Trump administration over what its demands should be. Among other things, the U.S. reportedly sought to exclude key tariff reductions of Canadian goods late in negotiations. And Politico reports that, in a remarkable break from protocol, the Commerce Department and the U.S. Trade Representative’s Office negotiated separately with the Canadians, undermining the ability of the U.S. to create a practical and consistent position. (The Commerce Department did not respond to Politico’s request for comment, and the U.S. Trade Representative’s Office declined to comment to Politico.)
The result of the mess was that Carney pulled his negotiators out of talks and said the American position was unacceptable. “We were not prepared to compromise Canada’s sovereignty or undermine our key industries,” he said. At another point he slammed Trump’s unreliability during the negotiation process, saying, “We recognize that sometimes [the U.S.’s] signature is written in pencil.”
Canada’s retaliatory tariffs are scheduled to go into effect on Sept. 8. Canada has not yet released the list of U.S. goods it will hit, but it has plenty of options, including steel, paper and electronics. And even though Canada’s economy relies more on exporting its goods to the U.S. than the other way around, that doesn’t mean it can’t do damage.
Krugman points out that “the U.S. economy is far more dependent on Canadian goods than most Americans realize.” Among other things, its countermeasures could devastate the parts of the U.S. economy that rely on Canadian crude oil and lumber. Canada could also hit the U.S. auto industry with new border taxes.
And while Trump likes to act aggressively to try to scare countries he’s trying to bully, there’s little reason to doubt that Carney will stick by his guns. He has staked his political reputation on standing up to the U.S. and represents a new wave of anti-Trump Canadian nationalism. Consequently it’s reasonable to believe that Canadians will have more tolerance for economic pain tied to the trade war — which they will likely attribute to Trump’s unpredictable and cruel temperament — than Americans will have for rising prices.
Americans are already disenchanted with the way that another war — the war with Iran — is pinching their wallets. If Trump had a modicum of common sense left, he would have found a way to prevent this trade war with Canada from breaking out, especially just ahead of the midterm elections.
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