This article originally appeared in the The Hub.
By Derek H. Burney, November 19, 2024
Canadians have every right to be concerned about the threat posed on trade by Donald Trump, specifically his pledge to initiate tariffs of at least 10 percent on all imports. But we should not overreact hysterically. For one thing, Trump will have many more pressing things on his plate when he is sworn in on January 20. We should respond prudently to what he does, not to what he says.
His promise to tear up NAFTA led to a renegotiation that essentially preserved the core elements and, in some cases, e.g. dispute settlement, strengthened the agreement. There is no point trying, as Premiers Ford and Smith suggested, to remove Mexico from the agreement. Their plans to assemble Chinese EVs have already provoked the newly elected president, and Mexico’s now cozier relations with Cuba and Venezuela are certain to antagonize the new secretary of state, Marco Rubio. Mexico will have its hands full dealing with Washington on many fronts.
However, in the pending 2026 review of CUSMA, we should segregate ourselves explicitly from Mexico on any renegotiation. They have not been reliably collaborative with Canada in past trade negotiations with the U.S., focusing exclusively on their own interests. Canada should do precisely the same. Defending our economic interests should be our paramount concern. We need certainty and clarity on market access. A constructive, positive review of CUSMA makes sense for both Canada and the U.S. and might even bring some mutual sanity on never-ending disputes over softwood lumber and dairy products. Bilateral trade with the U.S. is in rough balance, while what we receive from Mexico on trade we can get under the Trans-Pacific Partnership trade agreement.
Trump’s top target on trade is China and many of his key advisors are determined to challenge China’s trade surplus with the U.S. and its hammerlock on global supply chains. In the name of economic security, Canada could seek a broader bilateral arrangement with the U.S. leveraging our combined strengths in energy and critical minerals against shared risks with adversaries like China. Closer collaboration on sectors vital to advanced technology production for computers, optical, medical, and surgical equipment would enable us to blunt the challenge from China. But, first, to make our economy more competitive, we will need to jettison excessive regulations that stifle growth and investment.We cannot be complacent or rely on goodwill. Our current ambassador in Washington, Kirsten Hillman, is an astute trade policy expert who can maneuver nimbly and effectively when the time comes. We will need a concentrated strategy to muster support from all states for whom Canada is their largest export market, along with their Congressional representatives, and others knowledgeable about the importance of Canada to America’s economy. Trump’s son-in-law, Jared Kushner actively supported Canada’s concerns during the re-negotiation of NAFTA. We should identify a similarly influential top Trump official.Regrettably, there are no strong trade liberalization voices in Congress these days. The Make America Great Again Republicans are protectionists at their core, as are most elected Democrats. Gone are the days of bipartisan free trade advocates like Ronald Reagan, the two Bushes, or Bill Clinton.
A discriminatory tariff against Canada would violate the terms of the current agreement and should be challenged forcefully by our government as circumstances warrant. Tit-for-tat retaliation should be carefully considered—Florida oranges offer a juicy target. The EU has already said it would “hit back hard” on any U.S. tariffs and they have the capacity to do that. A tariff war would be a mug’s game, detrimental to all and beneficial to none. It is hard to square Trump’s plan to restore America’s economy on the back of tariffs that will trigger inflation and hurt consumers. Trump sees them as “the most beautiful word in the dictionary” and the best way to “persuade“ others. But, as history demonstrates, across-the-board tariffs are regressive and potentially calamitous for the global economy.
If we hope to get a fair hearing in Washington on any matter of concern to Canada, we must get our act together better at home, addressing quickly our lamentable commitment to defence spending. Our capabilities are described by American experts as hopelessly obsolete and are a stain on our otherwise proud military history. With increasing incursions by Russia and China, the priority should be to bolster our ability to defend our Arctic.
Instead of using our costly and cumbersome defence procurement processes, we should buy up-to-date, “off-the-shelf” equipment from the U.S. and other allies. That would facilitate efforts to meet our 2 percent NATO commitment in two or three years, not eight. For funding, we should emulate Trump’s plan for Elon Musk and designate a prominent CEO to address inefficiencies and waste in government. Not a task for bureaucrats.Doing so is not only the right thing to do to preserve our collective national security—it is also in our national interest to remove one of the main grievances Americans have regarding our relationship, and one that Trump will certainly use as leverage in any upcoming trade policy negotiations.
Derek H. Burney is a member of the CNAPS Advisory Council and a former diplomat who served as ambassador to the United States of America from 1989-1993.
