Although U.S. commerce secretary Harold Lutnick stated on the weekend that tariffs are here to stay on Canada, in the same breath he asserted that it was silly to say that free trade was dead.
I respectfully disagree with the commerce secretary because the moves of U.S. president Donald Trump’s administration have effectively moved the U.S. out of any type of free trade arrangement.
U.S. trade policy has undergone a 180-degree shift over the past six months.
The official U.S. trade policy over the past 40 plus years has been one of free trade and promotion of global free trade policies. This policy was largely successful in reducing tariffs across the globe and resulted in strong economic growth across the globe.
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It appears that the U.S. is now intent on upending the goal of international free trade and replace it with a system based on managed trade. This is being accomplished by imposing general tariffs and country specific tariffs.
The U.S. has imposed general tariffs on steel, aluminum (50 per cent) and automobiles (25 per cent), and copper (50 per cent) tariffs will begin on August 4, 2025. The list of special tariffs is growing every day.
These tariffs are not country specific, even though only certain countries, such as Canada, will be primarily hurt by the tariffs.
They are designed to move primary industries back to the U.S. It is managed trade by any definition.
The current administration is decidedly against free trade because it feels it allows other countries to “take advantage” of the U.S.
The administration has threatened to increase tariff levels for virtually all trading partners. These country specific tariffs are currently being negotiated with most trading partners.
One of the biggest concerns in these negotiations is that the U.S. is increasingly trying to link foreign purchases to the reduction in tariff rates.
A prime example of how this impacts other countries is the current negotiations with Bangladesh.
In order to provide some relief from the threat of 35 per cent tariffs, Bangladesh has decided to sign a memorandum of understanding on wheat trade with the U.S. The country has agreed to purchase 700,000 tonnes of U.S. wheat annually for the next five years.
Bangladesh imports five to seven million tonnes of wheat each year, with the Black Sea region the principal supplier. The U.S. currently exports a minimal amount of wheat to Bangladesh.
Guess who does supply higher quality wheat to Bangladesh? You guessed it – Canada.
Over the past 10 years, Canada has averaged 1.2 million tonnes of wheat exports to Bangladesh. This is clearly a move by the U.S. to use the current tariffs to link trade in certain commodities and hurt Canadian exports.
The tariff impact on Canadian exports is one threat to agriculture, but it is only one dimension of the impact of the change in U.S. policy. The managed trade of highly subsidized agricultural goods such as wheat, corn and soybeans from the U.S. may have an even larger impact on Canadian farmers. This situation bears watching as these trade agreements are concluded.
