Edward Alden, a trade expert at the Council on Foreign Relations, was blunt in his assessment of President Trump’s torrent of tariffs this week.
“The United States has destroyed the global trade system it created and left nothing in its place but a set of ad hoc arrangements,” he told Ana Swanson, my colleague who covers trade in Washington. “For trade, the result will be long-term instability that will be bad for business, bad for consumers and bad for global growth.”
[Read: Overturning the Global Trade System, Trump Puts His Ideas to the Test]
For Canada, the week meant that Prime Minister Mark Carney was unable to deliver on his plan to eliminate U.S. tariffs against Canada through negotiations. Instead of a trade deal, Mr. Trump raised tariffs on some imports from Canada to 35 percent from 25 percent.
And, as I wrote, the tariff increase also came with slights against Canada from the president, who has repeatedly dismissed the nation’s sovereignty and has called for it to become the 51st state. Mexico was also unable to reach a trade deal. But Mr. Trump postponed tariff increases against it for 90 days to allow time for more talks.
On top of that, Mr. Trump gave the other countries he hit with tariffs on Thursday night a one-week break before they take effect. But the increase for Canada started on Friday.
[Read: Trump Gives Mexico a Reprieve but Slams Canada With Higher Tariffs]
As of Friday afternoon, Mr. Carney hadn’t given up on making a deal with Washington. Given the president’s mercurial ways, that may still be possible.
The tariff increase is not as bad as it might have been. (Forgive me, a lot of numbers follow.)
With some very important exceptions, it applies only to exports from Canada that do not qualify as North American products under the rules of the free trade deal between Canada, the United States and Mexico.
When Mr. Trump applied the initial 25 percent tariffs earlier this year, trade economists estimated that only about 38 percent of Canadian exports qualified as North American.
But that was largely about paperwork. For items that faced lower tariffs, or none at all, when entering the United States, it was cheaper and easier for many businesses not to bother certifying that their products were North American.
The Bank of Canada estimates 94 percent of Canadian exports could qualify, however. And Carolyn Rogers, its senior deputy governor, said this week that the central bank was assuming that most exporters were now filling out the forms.
But there’s no such way out for cars, which are subject to a 25 percent U.S. tariff that’s adjusted to reflect the proportions of American parts in Canadian-made vehicles. Or for steel and aluminum, which still face a 50 percent tariff. (The steel and aluminum tariffs don’t apply just to the raw metals. Products that are made mostly from those metals, like an aluminum cellphone tower, also face that steep duty.)
When Tiff Macklem, the governor of the Bank of Canada, announced this week that he was leaving key interest rates unchanged, he noted that the tariffs on those three sets of products are “having a very direct, severe effect” on the industries affected by them.
[Read: Trump Trade Deals Threaten Canada’s Vital Auto Industry]
Despite Mr. Trump’s tariffs, he said that the Canadian economy as a whole “is weaker, but it’s not sharply weaker.” He added that “it is showing some resilience.”
Mr. Macklem spoke the day before Mr. Trump’s flurry of trade announcements. But he offered three scenarios — the good, the not too bad and the ugly — for where the president’s trade war might take Canada’s economy.
The country right now is in the not-too-bad situation. Mr. Trump’s tariff threats actually bolstered the economy during the first three months of the year as companies rushed to produce and ship products to the United States before the president’s plans became reality.
During the next three months, however, demand for Canadian goods in the United States fell sharply, reducing Canada’s gross domestic product by about 1.5 percent, Mr. Macklem said.
If the tariff situation stays much the same as it is now, Mr. Macklem predicted that during the second half of this year, the economy would stabilize and grow by about 1 percent, slowly reaching 2 percent in 2027.
In the ugly situation of additional tariffs on Canada, Mr. Macklem forecast that the economy would continue to shrink through the year. And in the good outlook, in which Mr. Carney somehow succeeds in getting tariffs lifted — a possibility the prime minister now says is unlikely — economic growth would return quickly.
While making trade policy and handling international relations are not in Mr. Macklem’s job description, he did offer some general advice to the nation.
“Canada needs to think about its place in the global trading economy,” he said. “We are very concentrated in our trade with the United States. The message is: The world is changing.”
Trans Canada
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Vjosa Isai took to the streets of Toronto to report on Premier Doug Ford’s plan to rip up several of the city’s major bike lanes as part of a program he believes will reduce traffic congestion. After her article was published, a judge ruled that the province’s plan was unconstitutional. Ontario is appealing that decision.
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Cécile Dionne, one of the quintuplets who became multimedia sensations during the Great Depression and victims of exploitation, has died in Montreal at the age of 91. Her sister Annette is the only one of the five now still alive. In 2017, I wrote about the sisters’ ultimately successful campaign to preserve the house now located in North Bay, Ontario, in which they were born.
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Citing “the deepening suffering of civilians” in Gaza, Mr. Carney said that Canada would recognize the Palestinian state in September. Mr. Trump threatened Canada on social media over the decision.
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Alberta, which has population of about five million people, now has more measles cases than the United States, which is home to about 340 million people. Some public health experts are calling on the Alberta government to declare a public health emergency to stave off infections.
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After watching seven shows at the Stratford Festival, Jesse Green, the chief theater critic for The Times, wrote that the “Canadian ‘elbows up’ attitude was showing.”
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Gary Karr, a double-bass virtuoso and a rare soloist, died at his home in Victoria. He elevated the prominence of the underappreciated instrument.
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Speculation abounded after Katy Perry and Justin Trudeau dined at a high-end restaurant in Montreal.
Ian Austen reports on Canada for The Times. A Windsor, Ontario, native now based in Ottawa, he has reported on the country for two decades. He can be reached at [email protected].
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Ian Austen reports on Canada for The Times. A Windsor, Ontario, native now based in Ottawa, he has reported on the country for two decades. He can be reached at [email protected].
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