Tariffs, Trust, and the Long Game

The 50% tariffs on $28 billion worth of Canadian goods imposed by the US administration have taken effect. Prime Minister Mark Carney’s decision to walk away from negotiations and retaliate with his own tariffs has sparked controversy among some premiers. However, it’s a necessary move in light of an unpredictable and unreliable US trade partner.

The Smoot-Hawley Tariff Act of 1930 is a cautionary tale. The American tariffs raised during the Great Depression led to global trade collapse, exacerbating the economic downturn. While we’re not yet at a similar precipice, the parallels are unsettling. Canada may be forced to play a waiting game, hoping that President Trump’s successor will restore some semblance of sanity to American trade policy.

The Canadian Federation of Independent Business (CFIB) has been critical of Ottawa’s previous tariff relief measures. According to Dan Kelly, CFIB president and CEO, these programs have been ineffective in delivering adequate support to small and medium-sized businesses struggling under the weight of US tariffs. This criticism highlights the need for more effective solutions.

The long-term implications are unclear. Will Canadian consumers eventually tire of retaliatory tariffs, driving demand for American goods back up? Or will this develop into a prolonged economic standoff, with both countries locked in a cycle of recrimination and protectionism?

Wab Kinew, Premier of Manitoba, has urged Canadians to remain resolute in their resolve. “We should be prepared to stand firm for two years,” he said, hoping that sanity would return to America once Trump departs the White House. Many premiers seem united in their support for Carney’s decision.

However, not everyone is convinced that this approach will yield results. Danielle Smith, Premier of Alberta, has called for resumed negotiations with the US. “We should always be doing everything we can to avoid, reduce and remove tariffs,” she said. While this might be a laudable goal in theory, it’s unclear whether the US administration is willing to compromise on its demands.

Canada finds itself at an impasse. Will we wait out Trump’s remaining two years, hoping that his successor will bring a more collaborative approach to trade? Or will we continue down the path of retaliatory tariffs and protectionism, risking further economic damage in the process? The choice is far from clear-cut, but one thing is certain: the consequences of this standoff will be felt for years to come.