Canada Day!

There is nothing I like being more than a Canadian. My compatriots may drive me crazy but our disagreements are political rather than patriotic.

Sadly, our current federal government thinks it can win an election – in a year – by picking a fight with our friends in the US. The PMO’s polling tells them that Canadians a) can’t stand Trump, b) will rally around a PM who stands up for Canada no matter how wrong we might be. I suspect that polling is right but premature.

No one wins a trade war and today the smartypants Liberals are embarking on a series of deliberately political retaliatory tariffs designed to hit Republicans where it hurts, at the polling booth. There are many things wrong with this strategy beginning with the fact it won’t work. Tariffing soy sauce because North America’s largest soy sauce plant is in retiring GOP speaker Paul Ryan’s district looks clever but isn’t. After all, at best, that plant ships about 10% of its production to Canada. Our tariff will be an annoyance rather than a game changer. And just as Canadians claim to be willing to stand shoulder to shoulder with Trudeau in opposing the Trump monster, Americans are perfectly capable of supporting the industries we target.

Canadians win when we come up with creative compromises. Flat out telling the US that we will not accept a five year sunset clause on NAFTA is stupidly beligerent. Intelligent compromise would have created a process – general review at 6 years, sectoral review at eight based on the general review and the possiblilty of revision at 10. It’s boring but it is very Canadian. Same thing with the steel and aluminum tariff. Figure out what the Americans are actually after (likely an end to the transhipment of Chinese commodity steel) and figure out how to make that happen while enhancing the Canadian position.

Unfortunately, this very Canadian approach is not very sexy. It is not going to save a floundering Liberal government. To do that, the geniuses in the PMO realize they somehow have to cast the next election as a referendum on Trump rather than a review of the Trudeau government’s meager list of accomplishments. To that end picking a fight with the US seemed like a good idea.

It isn’t.

With a year in hand, the US can pretty much destroy the Canadian economy and flatten what manufacturing is left in Ontario. They don’t need to do much, just impose a 20% tariff on all cars coming into the US and fail to exempt Canada. Boom, done. Like the rest of the world, Canada enjoys access to the American market because we have negotiated that access and the Americans, to date, have had no particularily compelling reason to restrict that access. Indeed, up until the fracking revolution, there was a strategic reason to keep Canadian oil and gas flowing to the US. That reason has gone.

It is a Canadian pasttime to bash Americans. All the more so with Trump in office. Where that comes from is not obvious but the reserves of anti-Americanism in Canada are, apparently, bottomless. And those reserves are filling fast as the American economy under Trump revives and thrives in contrast to Canada’s. I have no idea if Trump is Making America Great Again, however he is, unambigously, making America Rich Again. And he is doing that through tax cuts and deregulation which are anathema to the economic illiterates who surround Trudeau and infest the Finance Department. Normally, when the US economy surges, Canada enjoys a knockon effect. But between nitwit “carbon taxes” and unnecessary “trade wars” and an apparent inability to build pipelines, Canada is going in the opposite direction.

Between now and next Canada Day I suspect it is a good bet that Canada will make itself poorer. The only question is how much poorer.

If the PMO and the Liberal Party really think they will be able to run against Trump in a little over a year they have to pray that he does not continue to deliver jobs, growth, prosperity and a reassertion of American might internationally. They have to hope Trump will, somehow, be impeached, or lose the mid-terms decisively, or have his economic policies crash or walk into some other disaster – because if Trump’s successes continue and the Democrats fail to win big in November, he is going to be a much less attractive target.

Yes, if Trump does tariff cars at 20% he’ll be demonized all over the world. But where it counts, in the car plants in Ontario and in the parts manufactories, there is not going to be much left. Rail at Trump all you want, the fact is that it will be Trudeau who was dumb enough to poke the bear for political points.

I hope all my Canadian readers enjoy our National Holiday. And then I hope all my American readers enjoy July 4. In a year, we will still be celebrating Canada Day but, unless our politicians smarten up, we will be a poorer and less consequential nation than we are now. And, worse, that condition may very well be permenant as our jobs flow south.

This Canada Day our situation is serious but, with intelligence, not fatal. Next year?

Happy Canada Day!