A Trust Broken on Tariffs
The wreckage of Liberation Day, to the U.S.’s relationship with Canada, and beyond
By Brian Dijkema, President, Canada, of Cardus, and a former union representative.
Permit me to start in stereotypically Canadian fashion with an apology for what will be a universally, and perhaps uncharacteristically, harsh response to the Trump administration’s “Liberation Day” tariffs. My hope, to borrow from an old book, is that my American friends will remember that “wounds from a friend can be trusted,” and that it’s an “enemy [that] multiplies kisses.” We may be a nation that speaks French, but there will be no kissing here. The unpredictable rollout of global tariffs, set at rates that appear to be drawn from thin air, has been a disaster—not just for the stock markets, but for the future of the working class and for the trust that is necessary to build an order of trade that will contain those nations which seek to do us ill.
First, concerning my home country: the entire case for Trump’s tariffs against Canada is built on, to use a euphemism, shaky legal ground. CUSMA/USMCA—the existing trade relationship between Canada, Mexico, and the United States—was and is an agreement signed in good faith by our nations, and the evocation of the “emergency” to renegotiate it in the middle of its term is a total fabrication, at least where Canada is concerned. All available evidence makes clear that Mexico, not Canada, is responsible for the importation of fentanyl where U.S. neighbors are concerned, and the “northern border” seizures Trump points to had nothing to do with Canada; those drugs came from Mexico, too. Legally, and as quoted in Trump’s notice, the onus is on those breaking the agreement to show that there is, indeed, an emergency. That hasn’t happened. And the recent movement to include Canada as part of a global imposition of tariffs shows that it was never about fentanyl, but part of a broader attempt to restructure trade. The evocation of an emergency should be seen for what it is: a lie.
Supporters will surely object: these moves are just a negotiation, they’re tactics. Using unpredictability will get a better deal for America. But what can America’s allies expect from a reordering of global trade if America is deceptive about its intentions? That would appear to be a step where treaties and agreements cannot be trusted, and it is unlikely to lead to a new, stable order, and more likely to lead to chaos. Those who have long been critical of the existing order—myself included—want a new one with new rules that account for the realities of our enemies’ use of trade to undermine constitutional democratic dominance of our world trading system. Deception doesn’t benefit that new order, neither does chaos, and one should live not by lies. That this has simply been brushed over as an annoying side problem, and not a critical, perhaps existential, matter should cause Americans pause. A recent article in Commonplace by Nicholas Phillips about the USCMA, for example, doesn’t even mention the deceit, seemingly treating the executive branch’s assumption of powers based on lies as undeserving of focus.
And beyond the tariffs on the United States and Mexico, I think it’s time for those who have built the steel-man case for “Liberation Day” tariffs more broadly to recognize and name that what we have here is instead incompetence. First, the calculations for country-specific rates appear to have been pulled out of thin air in some cases. The new tariff rates came without warning to our trading partners and, before a recent reversal, were set to take effect immediately, preventing any country from trying to make sense of the tariffs or how to get them removed.
And the rates themselves don’t appear fixed at all—in fact, since the rates have changed at least once since I started drafting this article less than a week ago. And the entire process was ignorant of its effects on allied relationships—not just my native Canada, but the entire free world the United States is attempting to bring into alignment against China. What we have is a caricature of the steel man.
Hell, there was a user’s guide to restructuring the global trade system that shared Trump’s aims, and even that warned about the need for careful, prudent implementation of tariff rates so as to minimize inflation and the network effects of declines in trade that, in the past, contributed to recessions around the globe. In short, there was a clear alternative to the current rollout of the tariff plan, but it was ignored.
Thankfully, as the consequences of the announcement start to roll in, some Americans have recovered their republican (small r) sensibilities. Senators Grassley and others have made moves to recover the prerogatives of the legislature. They have good reasons to do so that extend beyond the fact that the tariffs are likely to leave Iowa cornfields, and good chunks of the agricultural sector, stunted and withered. The senators’ bill will, hopefully, not only allow farmers to thrive, but it is the first shot of republican life in a Congress that seems to have forgotten that checks on executive power is what makes America great. President Trump has threatened to veto the bill, and, frankly, Republican senators and representatives should welcome that. There are negative consequences from the tariffs on America’s working class, like layoffs, that are likely coming, some of which are already here. There is no reason why anyone else but the President should wear those consequences.
Some may look at these layoffs and simply say that, in the long run, the plan to reshore means everyone gets back to work and the companies go on a hiring spree. Perhaps, but the timelines to build major industrial projects in the United States face stiff headwinds. The underlying fundamentals of building major industrial projects—securing capital, moving to final investment decision, the approvals process, engineering complexities, and labor market shortages—work against short-term construction of sites, to say nothing of the problems the general ambiguity introduces. Both U.S. businesses and those of our trading partners need a reasonable timeframe to work under if that long-term goal is to be reached without needless pain and disruption.
If you add the potential increase in the cost of food from tariffs, and if there is significant inflation and unemployment in the short run, as many expect, people won’t care much about the potential long-run benefits. As even Michael Brendan Dougherty, a pro-tariff American conservative columnist, writes, this kind of shock to voters is unlikely to inspire praise.
But it is on the subject of China that, as a Canadian—a nation that shares an enemy with the United States—it’s worth pausing. Last month, I made the case that the only person happy with the tariffs was Xi Jinping. Since then, we have seen China not only reach out to nations affected by the tariffs (ask any Canadian involved in trade about China’s overtures to our nation). The tariffs might be affecting China, yes, but they are also creating alienation among erstwhile allies and positioning China as a regional leader among those with whom we should be making friends. Xi might not be happy with tariffs, but he sure is about the fact that he’s drawing closer to regional powers that have traditionally aligned with the United States. China is famous for playing the long game. One can imagine that they’d be happy to exchange some short-term economic pain for a dominant position vis-à-vis countries in the South China Sea and the Asia-Pacific writ large
Combatting China, after all, is integral to the Trump administration’s strategy. In fact, that same USMCA Commonplace piece mentioned earlier argues that concerns about China were the real reason behind the Canadian and Mexican tariffs. USMCA needed to be renegotiated because China was using, or could use, Canada and Mexico as a backdoor to get around restrictions into US markets. Yet, the piece provides zero evidence that this is true for Canada, citing instead concerns about Mexico.
Moreover, it ignores the data that, in fact, Canada’s trade balance with the United States is either balanced, or tilted in America’s favor. Readers might look askance at that assertion, citing U.S. government data that shows an imbalance in Canada’s favor, but the American numbers don’t account for the fact that the entirety of the imbalance is due to energy, which Americans buy at a discount from global markets, and then refine and sell for higher prices. In fact, data show that if you “remove Canadian energy exports from the equation and the trade story flips. Ex-energy, the United States enjoys a trade surplus with Canada of around C$60 (US$45 billion).” Further, the citation of tariffs, positively, as “hostage taking” should give anyone pause. Do you think America is the only country that has national pride? Is this the type of talk that is likely to strengthen relationships with said hostages, the very people you are hoping to build “fortress North America”?
American concerns about China using USMCA as an end run around American trade restrictions and security concerns are valid. The United States is right to push its neighbors to present a unified front against the threat of China, and that requires some measure of collective action. But the seemingly random imposition of tariffs is a terrible way to achieve an end that, at least from the Canadian side, is and should be a shared goal.
What I encourage my American friends to consider, where USMCA renegotiation and broader relations with their northern neighbor are considered, is that Canadians have shared concerns with China. America’s adopting a posture of someone taking hostages is unlikely to provide the political environment in which the end goal—closer ties between democratic nations, comprised against mercantilist powers like China—can be achieved. Indeed, looking at the polls in Canada right now, it appears that this type of aggressive, Chinese-style negotiation will have the opposite effect. The most China-friendly party in Canada—the Liberals—is effectively using the aggressive language of the Trump administration to reverse its political fortunes and is receiving help from China in doing so. Phillips writes about these tariffs as part of a grand strategy, but if it is, at the very least, not a wise one, it is more likely a counterproductive one. An effort to truly build a productive “fortress North America,” as the Trump team talks about, would spend less time on tariffs—which are not just a blunt tool for accomplishing this, but a volatile one. And they have the greatest scope for negative unintended consequences, given the complex nature of global production and the deeply integrated nature of our two economies.
There is a better way. Instead of operating under threats, both countries should commit to a shared front centered on combating China—not as a background issue covered by claims about fentanyl and “subsidies,” but as a core commitment. This fact should drive the next round of USMCA negotiations. That would at least make it clear that democracy and the rule of law are the ticket to free and integrated trade.