If one thing has been clear since the beginning of Trump’s second term, it is that he prefers bilateral trade deals. America has negotiated many such deals in the last year and a half. Somehow the Canadian trade officials have missed this. The only reason we have a trilateral trade deal in USMCA is that Nancy Pelosi would not allow a bilateral deal with Mexico to go forward.
The Canadians are now threatening to leave the USMCA trade talks if Trump triggers 50% tariffs. How is threatening something that benefits the Trump administration a good strategy? Let’s be reminded that the Trump administration has already triggered the sunset provisions of the USMCA deal.
Canadian trade minister Dominic LeBlanc met with U.S. Trade Representative Jamieson Greer for the third time in three weeks. However, it’s Canada’s Chief Trade Negotiator Janice Charette, who also participated in discussions, is making headlines with threats.
Charette is telling the Canadian public that formal trade discussions with America will end if President Trump and USTR Jamieson Greer trigger the 50% tariffs against Canadian goods which are scheduled to begin on August 19th.
Some history…President Trump and USTR Greer announced last month the U.S. would begin 50% tariffs on a range of Canadian products. the tariffs are intended as reciprocal action for Canada’s counter-tariffs on U.S. automobiles and steel, as well as decisions by Canadian provinces to boycott American alcohol. According to USTR Greer the tariffs will affect approximately $20 billion in Canadian imports.
Charette has indicated that if this happens, the Canadians will pull out of USMCA discussions and walk away from renegotiating the trilateral trade agreement. However, since the intent on the administration’s part is to eliminate the trilateral deal, how does this threat make any sense?
Trump wants Canada to expand its trade partnerships with other countries. President Trump wants Canada to diversify. Both U.S. Ambassador Pete Hoekstra and President Trump have said, repeatedly, that Canada should go make other bilateral deals with other nations.
Why?
Sundance notes two main reasons:
First, if Canada has to enter a bilateral trade agreement with another country, suddenly they learn what reciprocity means. They will have to give something in order to get trade benefit.
Reciprocity is a completely new concept for Canada who have taken advantage of the USA for a long time with ZERO reciprocity in mind.
…
In essence, Donald Trump wants Canada to go and try to cut more favorable trade deals, so they will learn how good they had it.
…
Second, if Canada cuts a trade agreement with, say, Europe, the terms of that free trade agreement (FTA) become the baseline standard for Canada in all their trade allowances and agreements.
This baseline then permits team USA to turn to Canada and say, “we want the same terms, or else.” We might even ask for most favored nation terms due to scale and scope of their dependency.
…
For around 40+ years (USTR Greer would argue 60+ years) Canada has benefitted from the U.S. economy purchasing their goods, allowing their businesses unlimited access to the U.S. market and yet simultaneously restricting the Canadian market from similar reciprocity. Those terms are no longer acceptable.
Prime Minister Carney and his trade delegation have only one card to play, political pressure and support from within the U.S. Congress. Carney is relying on Democrats to support him.
So, will the Democrats favor Canada over the US? Will the Democrats want to be branded as un-American as the mid terms approach? Does Carney have any leverage at all?