Canada can’t escape Trump administration’s war on trade

In the U.S. economic war with China, President Trump raised the stakes last week, with a 10 per cent tariff on an additional $300 billion of imported Chinese products.

Tariffs on imports are only one weapon Trump has employed in his escalating trade war. He also blocked Chinese telecom giant Huawei from selling its equipment in the United States and buying American-made critical technology inputs.

Congress has also become an active participant in the economic war. Recently, both Houses of Congress passed legislation to place a one-year ban on any new procurements of mass transit rail cars or buses from companies owned or subsidized by the Chinese government when procurement uses any U.S. Federal Transit Administration funding. The two bills must be reconciled into a single law before implementation.

The almost risible rationale for the ban on Chinese rail cars and buses is “national security.” After all, the wily Chinese military is likely to install cameras and eavesdropping equipment in the railcars and buses it sells to U.S. customers and, undoubtedly, glean extremely valuable military and industrial secrets from the conversations of American bus riders in high-security locations such as Cleveland and Oklahoma City.

Sarcasm aside, using national security to justify the ban is no laughing matter, including for Canadian businesses and their employees. The Trump administration has shown a repeated willingness to invoke national security as a coercive weapon against foreign governments. For example, the imposition of tariffs on Canadian steel and aluminum exports during negotiations of the United States-Mexico-Canada Agreement or USMCA (which is signed but not ratified), and President Trump’s threat to impose tariffs on Mexican exports to the U.S. if Mexico does not substantially curtail the transit of Central American migrants through Mexico to the U.S.

While many U.S. companies decry the Trump administration’s war on imports, others see it as an open invitation for protectionist lobbying. For example, even though they do not produce passenger cars, U.S. producers of freight railcars brought the “national security” concern to Congress’ attention. The threat that Chinese companies might use their success in selling passenger railcars to branch into selling freight cars was arguably the real motivation for lobbying Congress to act.

The president seems to believe his rhetoric, that protectionist trade actions benefit the U.S. economy, despite accumulating evidence to the contrary. What’s especially concerning is that Congress shows no inclination to check his power to cite national security concerns to justify his mercantilist view of world trade.

Republican members of Congress support Trump’s actions in hopes that they can gain the electoral support of Trump’s political base, while an increasing number of Democrats see free trade as yet another evil manifestation of market capitalism. Consequently, there are few, if any, vocal supporters of the USMCA in the U.S. Congress, and the outlook for passage of the agreement by Congress grows dimmer by the day.

Since the U.S. is Canada’s largest export market, the growing consensus in the executive and legislative branches of the U.S. government—again, that mercantilism is good politics—is an extremely worrisome development for Canadian businesses and their employees. It’s also a troubling development for the Canadian government, as it will likely face increasing economic pressure from the U.S. to ally with Washington against China (and who knows what other countries) to implement trade and investment sanctions in the interest of North America’s national security.