Animosities could prolong US-Canada trade war
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WASHINGTON (AP) -- The U.S. and Canada have ramped up their trade war, hitting each other with steep new tit-for-tat tariffs. Despite the bravado coming from both sides of the border, though, analysts suspect the longtime allies will eventually strike a deal to end a conflict neither really wants.
The prospects for compromise looked bleak Tuesday, with Canadian Prime Minister Mark Carney reacting to new 50% U.S. tariffs on certain Canadian goods by responding in kind on about $20 billion worth of American imports, including steel, dairy products, appliances and farm equipment.
"You're at war when you get attacked. We got attacked,'' Carney, who came to power last year on the promise that he'd stand up to U.S. President Donald Trump, said over the weekend.
Doug Ford, Ontario's populist premier, told The Associated Press on Monday that he was ready to escalate even further by cutting off his province's shipments of electricity and critical minerals to the United States.
Soon after, Trump declared his intention to hammer the Canadian auto industry with another set of import taxes if the Canadians don't "fall in line.''
With the breakdown threatening to harm one of the world's largest trading relationships and clouding efforts to renew the United States-Mexico-Canada Agreement that Trump negotiated during his first term, experts cautioned that there's still time to pull back from the brink of an even bigger trade war.
They've done it before. "If there is political will, there is an off ramp,'' said former U.S. trade negotiator Wendy Cutler.
'IT'S NOT REAL UNTIL SOMEBODY WALKS AWAY'
U.S.-Canada trade talks typically get testy, said Christopher Sands, who heads the Center for U.S.-Canada Studies at Johns Hopkins University.
The two neighbors have a long history of sparring over things like Canada's protected dairy market and subsidized softwood lumber exports.
"We've gone through this with Canadians before,'' Sands said. "It's almost like it's not real until somebody walks away from the table. … I'm not panicked.''
There are reasons to think something can be salvaged from the rubble of bilateral trade talks that collapsed Friday.
First, the U.S. tariffs that Trump imposed Saturday cover just $20 billion worth -- around 5% -- of Canada's exports to the United States and are unlikely to do much lasting economic damage. Oxford Economics reckons the trade conflict would reduce Canadian economic growth only slightly next year -- from a previously forecast 1.6% to 1.4%. On Monday, U.S. Trade Representative Jamieson Greer even tried to downplay the trade rift as a "tempest in a teapot.''
Moreover, Carney's retaliatory tariffs wouldn't take effect until Sept. 8. "That gives us this week. It gives us next week,'' Sands said. "Time to take a breather and talk about how to avert'' an all-out trade war.
Despite Trump's tough talk on Truth Social, his punitive auto tariffs wouldn't kick in until Jan. 1 -- well after the Nov. 3 midterm elections in which the president's Republican Party is hoping to keep full control of Congress despite voter frustration with the high cost of living.
So there's at least enough time for the countries to find a stopgap solution.
Cutler, now senior vice president at the Asia Society Policy Institute, suggested that the U.S. could tap an emissary that both countries trust to get talks back on track; she recalled that Trump's son-in-law Jared Kushner helped negotiate the USMCA eight years ago.
Canada would likely balk at a one-sided deal
Cutler also noted that Trump suspended his global tariffs for months last year to allow U.S. trading partners to negotiate with him. Many did, including the European Union and Japan, and ended up agreeing to lopsided trade agreements to dodge the worst of Trump's tariffs.
Canadians, though, are in no mood for a Trump-friendly trade deal.