Increased protectionism within the global trading environment is causing major shifts in how countries do business — and world leaders are scrambling to keep pace.
Despite the existence of highly integrated economies, protectionism is growing in popularity — spurred on by a White House that seems to be doing everything in its power to cut the United States off from the rest of the world, even if it means losing longstanding allies in the process.
For decades, Canada and the U.S. have had a longstanding friendship. The two countries share the longest undefended border in the world. Goods cross the border multiple times as part of their supply chains.
We haven’t always agreed. There have been tensions before.
Yet it’s safe to say few expected Canada and the U.S. would become embroiled in a full-fledged trade war — that seems to have no end in sight.
As of June 29, pending some sort of last minute change of heart from Washington, Prime Minister Justin Trudeau’s government was set to impose $16.6 billion in retaliatory tariffs on a laundry list of American goods.
The tariffs come after U.S. President Donald Trump’s administration imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports June 1, citing national security.
Canada called the tariffs “absurd,” “illegal” and “unacceptable.” The tariffs have been challenged both at the World Trade Organization and the North American Free Trade Agreement.
Washington hasn’t backed down. The U.S. president has even floated the idea of imposing an additional 25 percent tariff on all vehicles that cross the American border — a move that the Canadian auto parts manufacturing association told MPs in June would likely trigger a recession in Ontario.
At an announcement June 29 in Hamilton, Foreign Affairs Minister Christie Freeland told reporters the Americans have no grounds to escalate the trade situation further. Canada’s tariff response, she said, was “measured.”
The problem is that “measured” isn’t a word many would use to describe the Trump White House.
No one knows how long this trade war will go on. No one knows what the end marker is.
Former Prime Minister Stephen Harper cautioned during a June 27 speech in London, England, that the ongoing global trade tensions and continued threats to longstanding global alliances and institutions could extend beyond Trump’s tenure.
“Whether Donald Trump succeeds or not as president, ultimately, I do think that the re-alignment or the change of the approach that he is bringing is, to some degree, bound to outlast his presidency,” he said.
“I think the trend towards the United States beginning to act less consciously systemically and more consciously in its own national interest or, for a lack of a better term, ‘America First’ — I think that elements of that are going to outlive the Trump presidency. That’s my prediction.”
If Harper’s prediction is true, the result will be continued economic uncertainty. Businesses hate uncertainty. Governments traditionally hate uncertainty.
Canadian industry is already nervous. Many steel and aluminum producers have warned that if help didn’t come soon, they could be out of business within months.
More than a few warned that their entire livelihoods are at stake.
The Trudeau government has unveiled a $2 billion federal aid package for the steel and aluminum industries in an attempt to mitigate some the pain. The package includes additional financing and innovation funding aimed at helping businesses diversify and stay afloat.
The longer the trade situation lasts and the more uncertainty and concern that is expected, then the greater the risk that other countries could see protectionist shifts themselves. (India ring a bell anyone?)
Ottawa must also realize that many Canadians haven’t lived through an economic contraction like this before.
While history often repeats itself, for many, the current situation is new territory.
Reassurance and a steady hand at the helm will be sought by all.