Donald Trump barely mentioned Canada while campaigning for president, and it certainly wasn’t one of the countries he charged with “eating our lunch” on trade. Yet President Trump’s first substantial actions on trade have been targeted at Canada, normally considered an American BFF. What’s going on?
Not much that wasn’t already in the works, it turns out. Canada and the United States are, in fact, longstanding trade partners—but there have always been a few disputes regarding certain industries, even under the North American Free Trade Agreement, which went into effect in 1994. What’s different all of a sudden is, well, Trump, and the bombastic remarks he tends to make on matters few people were paying attention to until he declared trade the bogeyman responsible for falling middle-class living standards.
Trump recently said a Canadian effort to protect domestic dairy farmers was “disgraceful,” because it imperiled some American dairy exports to Canada. And his Commerce Secretary, Wilbur Ross, said recently that the United States will impose tariffs of 3% to 24% on imported Canadian lumber products used in homebuilding, to fight back, Ross says, against unfair subsidies that push the Canadian product below market prices.
Ongoing trade disputes with Canada
It would be less surprising to see such Trumpian punishments targeted at China or Mexico. But Canada turns out to be an easy target because the lumber dispute has been simmering for years, and the US government actually laid the groundwork for tariffs during the Obama administration. “It’s not necessarily a surprise,” says Cathleen Cimino-Isaacs of the Peterson Institute for International Economics. “This has been a bilateral irritant for decades. The United States has been a longstanding user of these practices. Maybe Trump will accelerate the use of them.”
The US has pursued six trade disputes against Canada at the World Trade Organization since 1998, relating to products such as dairy, grain and wheat. Canada has pressed 16 disputes against the United States during the period of time, involving beef, pork, wheat, syrup and other products. Six of those 16 disputes involved the same category of lumber the US Commerce Department now plans to fight back on, indicating the tit-for-tat nature of trade disputes. In general, one nation typically claims the other is imposing unfair tariffs on imports, or otherwise tilting the playing field to favor domestic producers. Some outcomes are inconclusive, while in other cases, the WTO finds in favor of one side or the other, and the offending party generally knocks it off. Canada has accused the United States of cheating on trade just as the United States is now accusing Canada.
There are similar procedures for settling trade disputes among the three signatories of the North American Free Trade Agreement–Canada, Mexico and the US. There have been more than 200 disputes since the deal went into effect in 1994, bust most of those date to the 1990s. Since 2010, there have only been a handful of disputes, indicating the three nations generally get along on trade–or at least they did before Trump arrived.
The United States is much friendlier with Canada on trade than it is with China. There are 4 distinct trade protection orders in place regarding Canadian imports to the US; there are 163 such orders pertaining to Chinese imports. Only 13 such orders relate to Mexican imports. But Trump’s beef with Mexico isn’t really about cheap imports from there; it’s the outsourcing of jobs once done in America to factories south of the border.
President Obama pursued numerous sanctions against trade partners his administration accused of unfair behavior, and won in many cases. But Obama barely ever talked about trade disputes and never blamed trade for the nation’s economic problems, the way Trump does. So some voters might think the US government never paid attention to trade abuses until Trump showed up, which isn’t true. In reality, Trump has simply made trade a much bigger deal, with voters almost certain to hear a lot more about it during the next four years.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.