John Ivison: Canada's best strategy is patience, not elbows
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Canada is a mouse fighting an elephant and is going to get crushed, said one correspondent.
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''Elbows up Carney' will be left in the dust when he caves to Trump,' he said.
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But Canada is not without leverage – it just has to be creative … and patient.
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The agreement that the European Union signed last Sunday reinforces the point that Ottawa should take advantage of the fact Trump's attention is elsewhere. The president acknowledged as much ahead of his trip to Scotland last weekend, when he said: 'We haven't really had a lot of luck with Canada … (it) could be one where they'll just pay tariffs, not really a negotiation.'
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That should suit Canada just fine. The strategic challenge is that the status quo is working better for this country than for anyone else. We want to maintain that, without drawing too much attention to it.
The effective tariff rate that Canada is paying is around 6 per cent, including section 232 tariffs on steel, aluminum and autos — much lower than the effective rate the rest of the world is paying (the Budget Lab at Yale estimates that at 18 per cent).
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This is not the time for 'elbows up,' even though Canada would like to get those sectoral tariffs reduced from the unsustainable levels currently being levied. Canadian steel and aluminum producers are currently paying 50 per cent tariffs, effectively killing the export business to the U.S. Aluminum exports have held up relatively well because of the lack of alternative sources of supply. But steel exports to the U.S. have fallen by more than 30 per cent since tariffs were introduced.
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The impact on the auto industry is just as grave, as General Motors pointed out when it said tariffs cost it more than $1 billion in the second quarter of the year. Duties on finished vehicles exported into the U.S. are 25 per cent (or 12.5 per cent if the vehicle contains 50 per cent U.S. content).
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If negotiators can make progress in reducing those tariff levels to more stable levels, then concessions can be made elsewhere.
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It matters less what headline tariff percentage level Canada signs up for (Japan and the E.U. were forced to agree to blanket 15 per cent deals that were more something for nothing, rather than quid pro quo).
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It would be manageable if Canada agreed to a 20 per cent tariff, as long as the 90 per cent of exports remained exempt under the U.S.-Canada-Mexico trade agreement and that agreement was extended to cover autos, steel and aluminum.
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