For adults only: The tough tariffs
The beautiful country of Canada is battling an ugly menace that is potentially more lethal than COVID-19. I am referring to the freshly imposed 25 percent tariff on Canadian exports to the United States.
According to the Canadian Chamber of Commerce, some $3.6 billion in goods and services cross the US-Canada border everyday. This makes the total annual trade between the two countries around $1.3 trillion. The Chamber also estimates that 1.3 million American jobs are tied to Canadian exports while 2.3 million Canadian jobs are tied to US exports. That half of this bilateral trade happens between related companies underscores the depth of economic integration between the two countries.
Tariffs are an unpopular tactical weapon wielded for a specific purpose over a limited period but their unintended consequences almost always outlive their targeted outcome. At their best application, they still hurt. At their worst application, they can be fatal.
I have heard many sensible proposals to address the tariff threat in a way that prevents its re-emergence in the future.
The first has to do with tearing down barriers to inter-provincial trade in order to unleash the full potential of intra-Canada commerce.
The second is to accelerate ongoing negotiations for free trade agreements with countries other than the United States.
The third proposal is to implement reforms that will raise Canada’s lagging productivity, a gaping hole in the country’s drive for competitiveness.
Lastly, many have advocated for robust federal and provincial programs that assert Canadian prominence in artificial intelligence and tech.
If successfully pursued, these actions will boost Canada’s long-term immunity to tariffs. But all these will require a fully functioning federal government and a consensus-building leader with a high level of domestic credibility. Sadly, Canada has neither. Its Parliament is on paid vacation while the ruling party selects a new leader to replace the incumbent Prime Minister who is stepping down in a few days. The reorganized Parliament will likely call for elections to seek a fresh mandate. It will be a while before we see a federal government that’s humming.
Retaliation
I have also heard “angry” proposals to “fight back.”
There are those who want Canada to retaliate with its own tariffs. This is, in fact, the default response of the incumbent government. It is puzzling how people miss the true nature of tariffs and view retaliation as a natural and automatic response. Tariffs are a circular firing squad, i.e., the bullets hit those who fired them. Therefore, a tit-for-tat response is like cutting the nose to spite the face.
The most infantile response I have heard amounts to no less than mutual destruction. An example is the threat of Ontario Premier Doug Ford to cut off power supply to the United States “with a smile on my face.” This is great for the ego but until when will we do this? This is a purely angry solution with no realistic goal.
How to fight a bully
The third response is a boycott of American goods in Canadian stores and Amazon. The problem with this action is that it will hurt the Canadian stores—especially the small guys and their employees—more than it will hurt the American manufacturers. Regarding the Amazon idea, assuming it does bite hard and create real damage, the nasty hammer will hit 40,000 Canadian workers at Amazon and the hundreds of thousands of middle-income Canadians who have invested in Amazon stocks and, for that matter, shares in many American companies.
Canadians have been told to prepare for short-term pain as these angry responses are carried out. Guess who will bear the brunt of the pain? Our COVID-19 experience has taught us that it’s not the guys in Ottawa, Queens Park, or Bay Street who will.
Come to think of it, how should you fight a bully? By climbing the ring he picked, using the gloves he chose and adopting the rules he wrote? I don’t think so. Those who want to respond with rage can take a leaf from the older folk who remind us that in the face of unfairness, “Don’t get mad. Get even.”
Let’s send home the angry kids, shall we? Tariff conversations are for mature problem-solvers who can clinically dissect a problem and find solutions that don’t boomerang and are enduring.
