Now that the Trump trade tantrums have died down a bit (we hope), it’s time for some dispassionate analysis.
Let’s begin with a question: “Whatever happened to Mad King Donald’s threat to rip up the North American free Trade Agreement (NAFTA)?” It has been months since the U.S. president has even alluded to the pact, let alone threatened to rip it up.
Perhaps this is because he knows he could never get the congressional support necessary to pull out of NAFTA. And he likely knows that Canada and Mexico know this. Which is why the two amigos, especially Canada, have been sitting pat on the more radical of the U.S.’s demands.
The Canadian embassy in the U.S. has been lobbying Congress and state legislatures for more than a year, and that lobbying appears to have paid off.
Trump’s national security tariffs on steel and aluminum from Canada, Mexico and Europe, then his personal attack on Justin Trudeau, may be part of a strategic retreat away from the original threat by Trump – and away from his promise to his voter base.
Designating a public bad guy, demonizing that person, blaming that person for whatever crisis you have caused and hoping you have thrown your base enough red meat so they’re willing to forget your promises is standard fare in any demagogue’s playbook.
So far, Ottawa hasn’t been willing to take Trump’s bait. In fact, Foreign Affairs Minister Chrystia Freeland has made another trip to Washington, D.C., to appear before the Senate Foreign Relations Committee in a signal of “business as usual.”
By this time, Trudeau probably has thought about what being regarded as an appeaser like Neville Chamberlain or a crisis leader like Winston Churchill would be like. Hence, Trudeau’s now famous statement: “Canadians are polite; we’re reasonable. But we also will not be pushed around.”
He chose Churchill.
Then, Trudeau was wise enough to follow the age-old political axiom: “If you can’t improve on silence, shut the hell up.”
Also wise are Trudeau’s political opponents for standing with him – something in sharp contrast to Trump’s situation in Washington. Opposition to the metal tariffs and to Trump’s behaviour is growing among Republicans.
If Trudeau can stick to his game plan, Trump will get him re-elected in 2019 – just as the FLQ crisis of October 1970 rescued Pierre Trudeau from plummeting polls.
Trump used Section 232 of the Trade Expansion Act of 1962 to impose these tariffs under the guise of national security. Sec. 232 allows the president to bypass Congress and impose tariffs by executive order. So far, 107 Republicans in Congress have objected.
Congress has only two options against Section 232: pass an amendment taking away the president’s power to bypass Congress – such a bill has been put forward, but is unlikely to pass – or stop the tariffs with a veto-proof majority, which requires support from two-thirds of Congress.
As the effects of retaliatory tariffs by trading partners affect the U.S. economy, the likelihood of such a motion will grow, which is why we will see Freeland lobbying in Washington a lot.
Trump also may be heading into a confrontation with the Federal Reserve Board. So far, the Fed has looked the other way rather than broach the subject of trade wars.
But John Williams, president and CEO of the Fed’s San Francisco branch bank and who is about to take over as head of the Fed’s New York operations, said in April that if trade conflict increases, we can expect less growth, more inflation and “lower quality of life all over the world.”
If Williams is even half right, the Fed, which operates autonomously, sooner or later will have to acknowledge the economy is being damaged. And if Trump interferes with the Fed, he could find himself in a crisis he didn’t plan on.
Ultimately, Canada can’t win a tit-for-tat trade war with Trump. But our government can wait him out and let the president’s own party rein him in. That’s a distinct possibility before the U.S. midterm elections in November.
Then, there is a growing possibility of Trump’s impeachment. The reasons he has been acting erratically, like a desperate man, aren’t difficult to understand. Neither is why Trudeau is remaining calm.