US President Donald Trump is escalating the trade battle between the United States and Canada.
After announcing a 20% tariff on Canadian softwood lumber, Trump tweeted the following on Tuesday:
Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!
— Donald J. Trump (@realDonaldTrump) April 25, 2017
The key dispute is the supply management system – which amounts to a government-enforced quota and tariff system which massively raises the prices of milk and cheese produced outside of Canada.
The Trump Administration sees that tariff as incompatible with fair trade between the US and Canada. As a result, they are pushing back against it – now more publicly than ever.
Increased pressure as NAFTA negotiations take place
Immediately after Trump’s election win, Justin Trudeau announced that he was happy to renegotiate NAFTA. He made the statement unprompted, and gave away significant trade leverage. Now, it appears the Trump Administration is going to keep pushing to get the most favourable deal possible for the United States, regardless of the impact on Canada.
Trudeau has leverage he could use, but he has so far refused to do so. For example, the United States wants their NATO allies to increase defence spending to 2% of GDP. Trudeau could use a commitment to strengthen Canada’s military (which we should be doing anyway), as a tool of leverage in negotiations over softwood lumber & NAFTA.
Instead, he is cutting the military, as spending is now at a historic low of just 0.88% of GDP.
It’s a big missed opportunity, and one that could have serious negative consequences for our country as we face a relentless negotiator in the White House.