Canada’s trade and Trump

We’ll all be watching how Ottawa plans to keep the U.S. border open to Canadian exports. And fortunately, the situation may not be as bleak as we first thought.

Up until the last week of January, most observers thought Canada had things well in hand by not waiting for the U.S. to declare NAFTA open to renegotiations and reminding anyone worth knowing in Washington that 35 American states depend on exports from north of the border.

But then Trump turned the world upside down by imposing a travel ban on seven predominately Muslim nations and displaying a level of belligerence that is shocking even for him. Within a week, the travel ban was thrown into legal purgatory and is likely heading to the U.S. Supreme Court.

Whether Trump’s refugee ban turns out to be constitutional or not, there has already been considerable damage. Hateful behaviour has accelerated and corporations and governments around the world are chafing at the thing they hate most – uncertainty.

A special report that addresses the impact of the Trump regime, released late last month by National Bank of Canada, predicts that a 10% tax at the U.S./Canada border would chop 9% off the value of Canadian exports to the U.S. That would result in a decline of 1.5 percentage points in the growth of Canada’s gross domestic product.

But, what Trump says may matter less and less: serious cracks have started to appear in his hold on power.

If court rulings against his signature initiative so far wasn’t humiliating enough, Vice President Mike Pence had to intervene in the Senate less than 20 days after inauguration to save confirmation of Trump’s education secretary after a mini-revolt in his own party. No other president has had to endure humiliation like this.

Instead of “draining the swamp” as Trump promised, the only thing he has drained so far is his own political capital.

A pattern has developed in which those around the president are constantly clarifying what the boss actually meant – so much so that Trump could be turning into King Lear. The more crazy things Shakespeare’s king said, the less power he had and the more intense the power struggle around him became.

This is likely why Justin Trudeau is keeping his mouth shut, despite public pressure to speak out about the refugee ban. As Napoleon said, “never distract your enemy when he is busy destroying himself.”

(Although Ottawa has been restrained, it is far from being passive about the Trump administration. The Prime Minister’s Office has set up a “war room” to monitor the Trump administration and develop strategy, including quick responses.)

But in a couple of months, we may be busy speculating about who is really running the U.S., with Trump potentially reduced to a lame duck.

Thanks to some good reporting by the Associated Press in the U.S. and the Canadian Press and the CBC here, we now know from leaked transition briefing notes which trade practices in Canada are being targeted by the Trump administration.

Most are the usual suspects, such as dairy, lumber, or limits on what Canadians can bring home through customs. These are items the two countries have been arguing about forever and probably will continue to do so.

However, there could be a significant issue about American-made auto parts used in vehicles that are assembled in Canada and exported to the U.S. Watch for Canada to use American content in Canadian-made cars as a bargaining chip.

We should also expect Ottawa to drag out NAFTA negotiations so that it can take best advantage of the wobbly state of the Trump administration.

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