Keep calm and make the case for trading on.
That's the advice from one B.C. analyst after U.S. president-elect Donald Trump threatened Canada and Mexico with 25 per cent tariffs starting on Jan. 20 unless both countries make changes to their respective border security.
But other analysts are less optimistic about Canada's ability to influence American behaviour and all voices broadly agree tariffs would hurt British Columbia.
University of B.C. political scientist Stewart Prest, who studies U.S.-Canada relations, warns against panic.
"We have been down this road before," he said. "The story is playing out differently, but the sort of underlying tune is familiar — unpredictability, sudden proclamations, requiring rapid actions. But we have months to go before this announcement is to take effect....so Canada has time to respond here."
Prest said the "best thing" Canada can do is to explain the detrimental effects of Trump's proposed tariffs on U.S. consumers.
"If the administration went ahead with that policy, everything in the United States, would get more expensive," he said in pointing out that U.S. tariffs on Canadian energy would for example amount to Americans paying a tax.
While Canada may need to respond with its own tariffs in the short turn, the "much stronger argument" is to show that this policy would "impose on American consumers" with one person — Donald Trump — ultimately responsible for it.
So how much influence does Canada have these days in the United States? Prest said initial reactions to Trump's threat suggest "an overwhelming sense" that Canada is "helpless" in the face of the American threat.
"It's certainly true that our Prime Minister (Justin Trudeau) does not have the ear of (Trump), but that is by no means the only line of communication here," Prest said. "There are strong lines of communication between provincial premiers and state governors and between legislatures north and south of the border."
Premier David Eby made comparable points Tuesday, but also implicitly called for unity among Canada's leaders in pointing to the potential of Trump using a divide-and-conquer strategy to play provinces off against each other.
"It's a significant risk right now and this goes back to the one underlying problem, which is that Prime Minister Trudeau is extraordinarily unpopular and premiers may be less willing to do what would otherwise be a good idea, simply because they don't want to be associated with somebody who is a political dead weight at the moment," he said.
Torsten Jaccard, assistant professor at UBC's Vancouver School of Economics, said tariffs would Canada in what he called a "very tricky" situation. "For every dollar of income earned in Canda, 20 cents of that is generated by an export to the United States," he said. "In the United States, of every dollar consumers spend, only two cents is going to Canadian exports. Those two numbers is basically everything you need to know about this. The United States does have considerable power economically over us."
If Trump goes ahead with these tariffs, they would lead to a recession in Canada, Jaccard added, pointing to estimates from the University of Calgary that would cost the average family about $2,000 per year. Ontario's automobile-manufacturing industry and Alberta's oil-and-gas industry would especially feel the recessionary effects, he added.
"On the income side, British Columbians would be slightly less affected...but it's still going to be a remarkably significant cost to British Columbians, if it (the threatened tariff) comes into effect," he said.
Like Prest, Jaccard pointed out that Trump had imposed tariffs during his first time, only to back off after Canada had responded "very targeted tariffs" aimed at specific regions of the United States. "But this does seem to be something of a different beast," Jaccard said.
He added that Canada's best course of action would be work with Mexico and potentially with China, as well as European allies to send a strong signal to Trump that his decision to renege on existing trade arrangements would have consequences.
"Now, would that be enough to change the mind of President Trump? I'm not sure," he added. "At the end of the day, we are probably looking at a future in which there are going to be higher prices and probably greater unemployment if these tarrifs come into effect. Really the only option we have is to try to get ahead of this and assauge Trump that fentanyl and illegal border crossings will not be an issue."
This said, Jaccard also strikes a pessimistic note. "The truth is, our backs are kind of against the wall here," he said. "There is not a whole lot that we can do here other than try to coordinate with our allies to deliver a coordinated retaliatory response."
David Williams, vice-president of policy with the Business Council of British Columbia, said on CKNW Tuesday that British Columbians will have to get used to an environment of unpredictability. Like Prest and Jaccard, Williams expressed concerns about the effects of tariffs. "It would be devastating for Canada's economy and B.C.'s economy," he said on the Jas Johal Show. "We are a trade-dependent economy," he said, adding that the United States' large internal market makes that country less reliant on trade. "This is why I think the incoming president thinks he has some leverage around this issue."
But if Williams called on decision-makers to be aware of American concerns around border security, those same decision-makers should also use their contacts to highlight the benefits of trade to most individual states.
Williams also called on decision-makers to re-evaluate Canada's overall economic picture and regulatory framework. Canada's competitive position relative to the United States has been stagnating, he added. "Most of our economic malaise is home-grown," he added. "Adjusted for population growth, we are the second-weakest economy out of 38 advanced OCED countries over the last five years."
More to come...
