There’s such a thing as cutting off your nose to spite your face, and the tariff war between Canada and the US is beginning to look like a case in point.
On Monday, the premier of Ontario, Doug Ford announced a 25 per cent surcharge on electricity exports to the US, with 1.5 million households and businesses in New York, Michigan and Minnesota likely to be impacted.
Trump responded with all-caps outrage, raising the March 12 tariff on steel and aluminium coming into the United States from Canada from 25 to 50 per cent — a threat that would mean curtains for Ontario’s auto sector. How, asked the US president, could Canada stoop so low as to use electricity, that so affects the life of innocent people, as a bargaining chip and threat?
Well, if the Ontario automotive industry dies, it’ll cost innocent people a lot more than an extra $100 per month on their energy bill. But admittedly, it wasn’t a good look from Ford. Somehow, a retaliatory policy that directly impacts people’s ability to keep the heat and lights on seems ill-chosen – as do policies expressly aimed to hurt red states and Trump supporters.
Anyway, US Commerce Secretary Howard Lutnick (whose phone must be ringing off the hook these days) promptly called up Ford. Next thing you know, Ford dropped the electricity surcharge, Trump brought the steel and aluminium tariff back down to 25 per cent, and an invitation was issued to Ford to pop down to Washington in a couple days and chat about renewing the United States-Mexico-Canada (USMCA) free trade agreement.
Wait, what? Why did Canada have to go through all this drama, only to end with what should have been the beginning – getting together to talk about USMCA?
That’s the puzzling question that’s dogged every step of what the Canadian media insists is a trade war, and which the American government says is a drug war. Diplomacy – negotiation – you know, talking about it, seems to have become an absolute last resort.
Fentanyl and border security are where we started. The Canadian government has been protesting – rather too loudly – that they’ve done everything Trump asked for to prevent the drug crossing into the US. But they fail to mention what concessions, if any, they obtained in exchange for Canada’s cooperation. The Liberals should have negotiated a secure, even if temporary, position for Canada while bigger issues were being worked out. Clearly, that didn’t happen.
Instead we’ve had a rollercoaster of tariffs and retaliatory policies. It has been hugely harmful to the economy on both sides of the border, and created an atmosphere of instability and distrust that, once the dust settles, will take time to overcome. So what, exactly, is going on?
Two recurring themes in Trump’s complaints against Canada are fentanyl and failure to respect the conditions of the USMCA free trade agreement. Interestingly, both issues have strong connections with China.
China was originally North America’s chief fentanyl supplier. However, since around 2020, China has mostly switched to providing the (legal) ingredients to Canadian superlabs run by organised crime groups, including Mexican cartels. Canada is now, unfortunately, one of the world’s leading producers of fentanyl and similar drugs, although most of its fentanyl is reportedly heading overseas rather than into the US, where Mexican fentanyl is available at a tenth of the price.
China is also suspected of using Canada as a backdoor to sneak undeclared Chinese-made car parts into the US, thanks to a loophole in USMCA. It is thought this may be at the root of Trump’s pressure on the Canadian auto sector and his demands for an early renegotiation of USMCA.
Trudeau was always cosy with China, and his administration was plagued with Chinese spying scandals. At a particularly low point, CSIS, Canada’s intelligence agency, leaked information that the Liberals had been warned repeatedly of Chinese election interference but took no action. Subsequent inquiries revealed the enormous network of influence Beijing had managed to set up in Canada.
Trump may like Canada just fine – but he may not like its closeness with Beijing. If Liberals have chosen to sacrifice Canada’s relationship with the US to protect Chinese interests, they certainly wouldn’t want to admit it. No, they’d be far more likely to demonise the US, suddenly become uncharacteristically patriotic, and insist that Canadians take Trump’s ‘51st state’ needling seriously, and generally exacerbate the crisis as much as possible.
Unfortunately, Mark Carney, Canada’s new PM, is unlikely to take things in a new direction. A longtime Liberal insider, the party’s relationship with China has doubtless long enjoyed his blessing.
Whatever the case, there’s at least one foolproof way to improve US-Canada relations: handing Canada’s problematic Liberal government a richly deserved pink slip.
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