Canada Comes to Terms With Trump

President-elect Trump has yet to take the oath of office, but his strategy of using the threat of tariffs already appears to be yielding dividends. Feature the news that our neighbor to the north is folding like a cheap suit in response to the president-elect’s demands that Canada toughen its border controls to prevent the flow of fentanyl and migrants into America. Or Trump threatened to impose a 25 percent tariff on Canadian imports to America.In the aftermath of Trump’s November 25 warning about Canada and Mexico’s “ridiculous Open Borders,” the liberal press fumed that the president-elect “has set the stage for a bitter global trade war,” as the Guardian put it. The newspaper cited “trade experts and economists” who were “warned to brace for steep costs.” One former aide of the International Monetary Fund fretted that this marked the “dawn of a new era of US trade protectionism.”Those fears followed grousing from the former head of the New York Federal Reserve Bank, William Dudley, who argued voters were “in for a shock” if they imagined Trump’s tariffs “will make them better off.” The Times’ Paul Krugman warned that Trump’s “radical” call to impose tariffs “could wreck our economy.” If Canada’s response is any indicator, though, all of these alarmists seem to have missed the point of Trump’s tariff warnings. The news out of Ottawa is that, per the Times, “Canada is working on a broad plan, including drones and police dogs, to address concerns raised by” the president-elect over the border. In a parley with provincial leaders, Mr. Trudeau and top officials “said they would come up with measures to fortify the border.” Details, including a timeline and a price tag, are slated to be presented to the incoming administration before President Trump’s inauguration.Canada’s acquiescence to Trump’s border demands, though, is sparking debate within Mr. Trudeau’s government. His deputy, and finance minister, Chrystia Freeland, stepped down this week, reportedly because she disagreed with the prime minister’s agreeable approach. They differ, the Washington Post said, over how to respond to Trump’s “economic nationalism, threats of tariffs, and the prospect of a trade war.”Mr. Trudeau, himself, could be on shaky ground as a result. On verra. Meantime Canada’s cooperation could be a vindication of the use of tariffs as a policy cudgel. Our Lawrence Kudlow, who headed the National Economic Council in President Trump’s first term is of that view. “Reciprocity is the new free trade,” Mr. Kudlow said in the leadup to the election, prefiguring how Trump would use tariffs to advance American interests.Mr. Kudlow contended that “the very tariffs that the liberal economic establishment hates so much” would turn out to be “the pathway to free trade.” He added that “countries with unfair trading practices will be denied access to the great American market unless they lower their trade barriers.” The Fox Business host reckons that “Trump is a master negotiator at this,” and as a result “the worst-case high tariff rates will never actually come to pass.”In response to Trump’s warning, Mexico’s president, Claudia Sheinbaum, insisted that “Mexico must be respected, especially by its trading partners.” Communist China, too, didn’t sound especially compliant after Trump demanded that the mandarins do more to stop the flood of deadly fentanyl into America or face new tariffs. “No one will win a trade war or a tariff war,” a Chinese embassy official warned.“The U.S. side should cherish China’s goodwill,” Beijing’s foreign ministry added, somewhat ominously. That’s a reminder that raising tariffs, as these columns have noted, can cut both ways, as the disastrous Smoot-Hawley levies of 1930 proved. Threatening to boost tariffs could, in the end, prove to be a more effective tactic when deployed against America’s allies — and have less efficacy against our global adversaries.

Canada Comes to Terms With Trump

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