Canada’s quick retaliation to U.S. President Donald Trump’s latest volley in his “America First” campaign has raised fears of a trade war between two of the world’s friendliest allies – and thrown doubt on Canada’s long-held status as a favoured partner of the economic superpower.
Friday, Trump fired back at Canada over the retaliation against Washington’s steel and aluminum tariffs, and appeared to threaten possible action against Canada’s lumber industry.
The consequences of U.S. steel and aluminum tariffs for Canada’s economy are expected to be modest. The greater concern is the future of Canada’s relationship with its largest trading partner, said Benjamin Tal, deputy chief economist of CIBC World Markets.
“I think the more significant issue is that Canada will have to retaliate and start a mini-trade war, which is clearly negative,” Tal said. “That will have a negative impact on the Canadian dollar and the optimism about NAFTA will be replaced with pessimism — which is much more significant than the actual tariff.”
The key now for Canadian negotiators will be to refuse the U.S. administration’s efforts to entangle the issue of steel and aluminum tariffs with the NAFTA negotiations, said Eric Miller, president of the consulting firm Rideau Potomac Strategy Group, which focuses on trade issues...
This has been excerpted from the 31 May 2018 edition of the Financial Post.