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Last weekend, POTUS has shifted tactics from ‘whack a mole’ to ‘whack a friend’ on trade when he declared in a tweet after the G-6 + 1 summit that Canadian Premier Justin Trudeau had betrayed the US:
“Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!” He continued in another tweet one minute later said of Trudeau’s comment, “US Tariffs were kind of insulting” and he “will not be pushed around.” Very dishonest & weak. Our Tariffs are in response to his of 270% on dairy!”
So, why is the President going after Canada anyway? Canada, our long time neighbor to the north, ally during WWII, and trade partner that we actually have a trade surplus. Yes, our trade with Canada is at a surplus of $8.4 billion in 2017, according to the New York Times, when services are added as shown below:
Sources: US Census Bureau, IFF, The Wall Street Journal, The Daily Shot – 6/12/18
Canada and the US have over $693 billion of commerce between the two countries and nine million American jobs depend on trade with Canada.
In the past year, the President has picked on Canada slapping tariffs on softwood lumber causing lumber prices in the US to soar, because the US imports 96 % of the lumber it needs mostly in residential housing from Canada. POTUS has taken aim at Canada recently to include the country in the tariffs of 25 % on steel and 10 % on aluminum. Over the weekend he focused on dairy in as his tweet noted above about Canadian “270 % tariffs on dairy”.
So, let’s look at that 270 % tariff figure, the US actually has a 2:1 surplus in diary products trade with Canada:
Sources: Bloomberg, Statistics Canada – 6/11/18
The reason there is a 270 % tariff on dairy powder is a system of supply management that was agreed upon by the US and Canada. For most dairy products sold within the quota of US imports into Canada a tariff of 7.5 % is applied by the Canadian government. When imports exceed the supply management quotas, super charges go into effect on products like dairy powder or over quota milk at 241 %. Canada has established a supply management system with the US on dairy products, as most countries including the US subsidize their dairy industry.
First, our President needs to treat our long-time ally to the north as an ally and friend to the American people with respect, dignity and cordial public discourse. Privately, he may have disagreements, and negotiations should proceed to overcome trade imbalances where appropriate and to protect American jobs.
Second, the facts need to be used, not falsehoods as POTUS admitted in his first meeting with Trudeau, that he made up the idea there was an imbalance or equality or he didn’t know. It is time to do the homework, research the facts in our relationship, preserve the on-going huge amount of commerce we already do, and figure out how to work more closely together as partners not adversaries.