How Canada should deal with Donald Trump
First, Canadian politicians should stop talking about what we should do. Nothing is accomplished and it only gives Trump and his team ideas and shows how divided we are. Trump is much smarter than many opponents realize, and he is especially good at negotiating.
Second, while Canada will never become the 51st state for reasons too numerous to list here and while a 25% tariff on all Canadian goods is unlikely, the danger to the Canadian economy from Trump is far greater than most people realize.
What should we do?
The government must form a team of experts and include the heads of the Liberal and Conservative parties. Since the Liberals are likely to lose the upcoming election, the Conservative leader must be involved. The Premiers should also be involved because they will have to make hard decisions just as much as the federal government.
Currently, Premiers like Ford of Ontario and Legault in Quebec are talking tough to score electoral points. Ford has even called a snap election on the issue. Nothing is off the table they say. We can cut off Hydro and nuclear energy from Quebec and Ontario respectively. On behalf of Alberta, they say, we can cut off oil exports. Canada also has critical minerals that the US needs.
There is no question that doing these things will hurt the US and lead to higher inflation, possibly much higher gas prices (70 cents per gallon or more) and increased energy prices in the northern US. Canada will also suffer short term and to a much greater extent than the US – probably a recession, hundreds of thousands of jobs lost and the flight of capital. However, longer term it will be much worse than that. The US has a much bigger market and the strongest economy in the world. Particularly under Trump, they will rapidly retool the northern refineries to pivot from heavy and medium crude oil that Canada provides to lighter oils that they can obtain internally and from countries like Saudi Arabia. Trump has already approached Saudi Arabia to open the taps. Can Trump convince the Saudis to play ball. Consider that Saudi Arabia’s biggest fear is a nuclear Iran. Only the US and maybe Israel or the two together can remove that danger.
As for Hydro power and nuclear energy, not exporting it will lead to higher energy prices short term but again, the Americans will find solutions mostly by building nuclear plants. The same applies to critical minerals, they can be obtained but at a higher cost.
Short term this type of reaction by Canada will hurt the US but Canada much more. Long term, the US will not need to deal with us anymore and that is an existential threat far more serious than a 25% tariff.
Are there solutions?
Politicians think short term which is normally a bad thing but not in this case. Trump wants inflation to go down and tariffs will do the opposite. Further, several northern swing states will be the hardest hit. However, Trump also wants a deal where he is a winner. Canada can do this but not by negotiating in public and not by negotiating with itself. That means don’t offer concessions that have yet to be requested.
In hard-fought closed-door negotiations, there is much Canada can commit to in return for no tariffs. All the following will be good for Canada as well as the US:
- Increasing our defense spending to 2% of GDP, not in a few years, but immediately.
- Eliminating dairy, eggs and poultry supply management which Trump views correctly as subsidies.
- Increasing spending on border security to reduce illegal aliens from entering the US as well as drugs. The same border security will also catch illegals, drugs and guns coming from the US. Undoubtedly, there will be more coming from the US than Canada but let Trump consider this another win for him.
- Agreeing to re open the Mexico, Canada, America free trade agreement for negotiation now.
While we are negotiating, we must get allies in the states who will argue for us. The northern states need our oil, energy and auto parts. Florida needs our market for citrus fruits and our snowbirds.
Making Canada stronger
Canada is very vulnerable, and it is our fault, but we can start fixing things now. Being weak economically puts us at risk, especially when dealing with a strong America. 97% of our oil goes to the US. We need pipelines to eastern Canada, so we are not totally at the mercy of the US. They haven’t been built even though they are much safer than shipments by rail or truck. Why? Because the climate change activists want Canada to produce less oil. They think we should get our oil from places like Venezuela or Iran. Or perhaps all cars can be electric. Funny, consumers don’t seem to want electric cars, at least not now.
Once we are negotiating, we can also offer cheaper oil for a limited period if the Keystone pipeline is completed. That would fit with what Trump wants. Win-win.
We must also eliminate all inter-provincial trade barriers. These include different regulations for labor in various provinces, different labelling requirements for various foods and other barriers. If free trade worldwide or with the US is good, then surely having one free market within Canada is also good and it is entirely within our control.
In addition, Canada has a huge debt and deficits every year with no end in sight. This removes our ability to deal with unexpected shocks. In this case it is Trump and tariffs, but it could be another pandemic or a collapse in oil prices or any of several unanticipated events.
We have far too many bureaucrats administering unnecessary programs. To add insult to injury many of these self-entitled bureaucrats don’t want to work in offices anymore. How dare the government require them to come to the office 3 days a week? How dare their bosses ask for proof that they are actually working at home and meeting productivity targets?
Another problem is that Canada spends huge amounts on fighting climate change. This is no more effective than the Dutch boy putting his finger in the dike. In the fairy tale it worked but in real life he would have been swept to his death. Our contribution to global warming is miniscule but we want to set an example. If we think China or India will look at what we do and learn from us, we are delusional. It is time we woke up and took care of ourselves first or else we may just be crushed by the US and become the 51st state.
If you enjoy reading my Uncommon Sense articles, share them or forward them to others and invite them to subscribe. It is free and there is no advertising on my web site.
3 Comments
Outstanding article and well thought out opinions. Pleasure reading
Hi Bill
As usual well explained !!
The first and most important is that Trudeau should reopen parliament Monday morning
Why is it closed when this turmoil is going let’s get the conservatives and liberals at the table to aggressively negotiate because that is what Trump loves
I agree but we know why Trudeau shut down parliament. He wanted to avoid an election at least until a new Liberal party leader is chosen. Almost certainly the new leader will be Mark Carney who is smarter than Trudeau but was a very close advisor and he will have the same failed policies. I hope voters are not stupid enough to vote for him thinking they are getting someone new.
Dr. Bill Steinberg
Dr. Steinberg has a BSc from McGill University, a PhD in Psychology from Northwestern University, and was a professor at Concordia University. He was Mayor of the Town of Hampstead for 16 years and led the demerger battle. He was was awarded the Queen Elizabeth Diamond Jubilee Medal and is currently President of the Cochlear Implant Recipients Association.