Are tariff threats a part of U.S. strategy in NAFTA talks?
Donald Trump is president of the world’s most powerful nation, but he’s also a businessman. It’s the tough businessman in him who was doing the talking when Trump tossed out the threat of tariffs on foreign steel and aluminum, then mentioned the possibility of an exemption for Canada in exchange for favourable terms in NAFTA negotiations.
When the tariffs were announced last Thrsday, Canada was given a temporary exemption, but the question is for how long?
As bargaining chips go, Trump’s tariff talk is a big one. The threatened tariffs would have hit Canadian steel and aluminum producers hard, with the ripple effects touching Canadians at large. According to the Canadian Steel Producers Association, exports of steel directly support 20,000 Canadian jobs. A hit to Canada’s steel industry would be felt by other sectors, too. For example, Hamilton, often referred to as “Steel City”, is home to about 10,000 of the industry’s jobs. In a Global News story, Keanin Loomis, CEO of the Hamilton Chamber of Commerce, noted, “That represents about $2 billion in local procurement, and conservatively that means there are about 30,000 other jobs that are reliant upon the steel industry here in Hamilton. Just in Hamilton.”
Even Canadians not involved in the steel and aluminum industry would feel the impact, since steel and aluminum products imported from the U.S. would see their prices increase under new tariffs. That would include a broad range of products, everything from vehicles to appliances to canned beverages.
Needless to say, Canadian officials didn’t greet the tariff news warmly. Prime Minister Justin Trudeau called the threat “unhelpful,” coming just ahead of another tense round of NAFTA talks. It surely wasn’t coincidental that Trump’s tariff ploy emerged during a crucial congressional election in the steel-producing state of Pennsylvania. It’s an election the Republicans are worried about losing.
But there are critics of Trump’s tariff threat on his own side of the border, and within his own party. The U.S. auto industry and the United Auto Workers union are warning that the tariffs will kill jobs not only in Canada but in American auto plants, too. House Speaker Paul Ryan and other Republicans fear the tariffs could lead to a trade war. The Associated Press reports that Republican leaders of the House Ways and Means Committee have circulated a letter opposing the proposed tariffs. Criticism is coming from the other side of the ocean, too. The European Union Commissioner for Trade is warning that if tariffs are placed on European steel and aluminum, the U.S. could face an import tax on American products such as Levi jeans and bourbon.
Trump’s threat of tariffs is perhaps simply a strategic salvo designed to elicit further concessions from Canada and Mexico in the NAFTA negotiations.
Judging from the strong negative reaction coming from all directions, it would seem foolish for the U.S. to follow through on the suggested tariffs, since it would likely result in a lose-lose scenario for both sides.
Even for the billionaire author of the book “The Art of the Deal,” that doesn’t look like a good business move.