Trade dispute between Canada and the US ‘will hurt’

Prince Albert MP Randy Hoback speaks to members of the Prince Albert Chamber of Commerce during a NAFTA presentation in February. -- Herald file photo.

A University of Regina economist and MP Randy Hoback agree that in a trade battle against the US, Canada loses.

While millions of Canadians will be celebrating the nation’s birthday Sunday, manufacturers and exporters will be bracing for impact as the trade dispute between Canada and the US escalates.

July 1 is the day Canada’s retaliatory tariffs on $16.6 billion in US-produced products will come into effect. The measures include a 25 per cent tariff on some American steel and aluminum products, and a 10 per cent tax on other goods including drinks such as coffee, whisky and orange juice, larger goods such as boats and lawnmowers, and grocery store staples such as ketchup and toilet paper.

Canada’s tariffs are in response to 25 per cent tariffs on Canadian aluminum and steel announced by US President Donald Trump. Trump ended the exemption that Canada had to steel tariffs. That change came into place June 1.

Canada’s actions will also see $2 billion funnelled to the steel, aluminum and manufacturing industries.

While it might feel good to strike back, according to an economist at the University of Regina, Canada will lose big in a trade war with the United States.

“Ultimately, who ends up paying for tariffs are consumers of the smaller market,” said Jason Childs.

“The American economy is not nearly as dependent on international trade as we are. It’s really important that we keep in mind that we are very trade dependent and they are much less so.”

Prince Albert MP and Canada-US relations critic Randy Hoback said the tit-for-tat tariff fight will end up being very painful north of the border.

“It’s unfortunate we got to this stage, very disappointing that we’re seeing tariffs come on,” he said.

‘That means consumers end up paying more for goods and governments collect taxes at the border. It’s frustrating, but in the same breath, when Trump put tariffs on Canadian steel and aluminum we had to act accordingly.”

One of the risks, though, is the tariffs only serve to anger Trump who has not been receptive to Canada’s advances on free trade.

“There’s always that risk,” Hoback said.

“That’s the problem I have right now. We’ve known for years these tariffs were a potential, and there was no planning done. The only planning was reactionary, and that was slapping more tariffs on in retaliation. You hope it doesn’t turn into a trade war because nobody wins and Canada definitely loses in a trade war with the US.”

Childs said that if the move to retaliate with tariffs gets the US to back off it could be worth it. But if it doesn’t and the dispute escalates, the retaliatory measures would be a bad idea.

“There’s always the risk with these kinds of retaliatory actions that it can evolve and nobody can really remember who started it,” he said.

“There’s a real risk they respond by putting more tariffs on and we respond by putting more tariffs on back and forth until things get even more ridiculous.”

Buyers of manufactured goods will particularly feel the pressure from tariffs on both sides, Childs said. That isn’t good news for Evraz Steel, or for Ontario auto manufacturers.

‘We’re going to be affected but it’s not as bad as if it were on agricultural products or raw materials like oil,” he said. “I would be very concerned if I were in Ontario.”

That’s because in things like vehicle manufacturing, components often go across the border multiple times during the manufacturing process. Each time, those products would be hit with tariffs. The same is true in Evraz’s pipeline manufacturing process. Materials go from here to Portland and back.

Essentially, Hoback said, it’s going to be painful.

“We’ve been working very closely throughout the last two years in the house, throughout the Senate, and business to business talking about the negative effects of putting a tariff at the border,” he said.

“The reality is the people we talk to get it, they repeat our numbers back to us. The other reality is the US administration isn’t listening. They’re just going ahead and putting on these tariffs. That’s the frustration throughout all of this. It’s going to hurt a lot of jobs on both sides of the border.”

Businesses in Ontario are already feeling the pinch.

According to CTV, a steel pipe manufacturer in Sault Ste. Marie Ontario, Tenaris Algoma Tubes, said it is laying off about 40 people as a result of tariffs that have “created an unsustainable market to serve our U.S. customers.”

Short term, though, there isn’t much that can be done. The best way forward, Childs said, is to take a deep breath and go back to the negotiating table.

“It’s time for everybody to play adults for a while and then sit down and sort this out,” he said.

“It’s time for the adults in the room to speak out and look really hard at trade policies and tariff policies on both sides of the border, because we don’t have completely free trade with the US. It’s important that we remember that.”

Hoback agrees that it’s time to reach a deal on NAFTA and end the trade war before it starts, but he isn’t overly optimistic.

“This is going to be painful. It’s going to hurt. I don’t see any light at the end of the tunnel until we’re past midterm (elections in the US),” he said.

“The way forward is to complete NAFTA and get a trade deal done with the US.”

 

 

 

 

 

Thierman Financial