There should be neither retaliation nor appeasement in response to the Trump tariffs

After months of hype, United States President Donald Trump’s threatened 25% tariffs on Canadian exports to the U.S. are now coming into effect.  There have been months of debate about how to respond, and there is a growing consensus that Canada should seek to punish the U.S. with its own trade retaliation.  This notion is misguided.

For clarity, a tariff is a special tax applied on importers of select foreign goods and services, which diminishes the competitive pressure upon a domestic firm to keep prices low.  In other words, while the Trump tariffs would cause significant pain to affected Canadian businesses, they would also increase prices for American consumers when non-Canadian firms are given breathing room to raise prices.  There would be a domestic political cost for the Republicans for these price increases.

It is not clear that Trump’s tariffs would be as painful in totality to Americans as to Canadians, but Trump’s economic ignorance is causing him to also seek tariffs against Mexico and other countries, and the accumulated cost to Americans will be high.  In other words, Americans will suffer from the tariffs even with Canada doing nothing in response.

Trump is a psychopath and quasi-fascist who may be virtually impossible to reason with.  Appeasing him or offering him some kind of policy “win” for the tariff threat would only encourage him to make such threats repeatedly, with the expectation of Canada grovelling without end.  But equally so, if there were a path to persuading him to back off, it would not be in threatening to hint agreement with him that cutting off trade is of national benefit.  He will not be persuaded by Canadian tariffs against U.S. products (which would hurt Canadian consumers) nor by shutting off any Canadian export industries to the U.S. (which would cripple the specific Canadian businesses in question).  Whatever harm Trump causes to the Canadian economy with his tariffs should not be compounded with Canada taking further steps to shoot its own foot.

If there are to be any retaliations against the U.S., it should only be done with measures that are expected to affect Republican states or Trump sycophants more than Democrat states – a difficult proposition to implement.  So tough times appear to be ahead, with no easy answer to avoid some coming economic pain.  Canada may need to reconsider opportunities to grow its economy outside of U.S. trade, even if that will be much easier said than done.

If there is anything that Canada absolutely should not do, it should not compromise the productivity, fairness, and non-discrimination of its own economy, just because an ignorant cult leader in control of another country understands none of those virtues.  We should remain better than that.