Tuesday, 25 April 2017

Trump's Hardwood on Trade

Yesterday, it was announced that a 24% tariff would be applied to Canadian softwood lumber entering the United States.


You may recognize the term softwood lumber, as it has been mentioned various times in the media throughout the years, in fact, this topic goes back to the 1980's, where tariffs were threatened or applied to our exports, in order to cease potential dumping and unfair competition. In many of these cases, Canada has fought back and has won, because at the end of the day the Americans need resources and Canada has them.

In the case of Donald Trump and his administration, we have all been expecting some kind of bold and irrational move that would purport to defend Americans, while causing further stigma and chaos. While many figured it would be Mexico as the first main target, Trump has decided to go after an easier target, Canada.

Americans argue that because we grow our lumber sources on Crown Land, it provides a direct subsidy to producers. American producers source private lands, which means their costs will generally be greater compared to Canadians. Throw in a 30% lower dollar and the Trump administration has all the ammunition it needs to attack Canada.

Last week Trump declared that NAFTA would be torn up and renegotiated and that an action plan would be revealed within two weeks.His central argument is that Canada takes advantage of America's generosity, while Mexico directly undermines it. Interesting that no tariff has been implemented regarding Chinese imports, but that will most likely arrive later.

Why?

I believe that Donald Trump is basically playing his version of politics. Trump is a business man and irrational, mainly because he relies on the media as his main resource for international and domestic affairs. If all you are watching are the debates on trade coming from certain right wing news channels (Fox), it is no surprise that you perceive an ongoing natural trade agreement as disgraceful and totally unfair.

His action words alone are being utilized to further dramatize the issue and as such rally Americans. You can bet that a lot of Trump supporters will begin their distaste of Canadian sourced items now, as we have been lumped into the same category as Mexico and China, which is both unfair and just plain rude.

Trump has his own bullshit language that I honestly believe only his supporters can sometimes understand. It has not reason or rhyme, except to further his agenda to strong arm both friend and foe in order to get his way. In the case of softwood lumber, Trumps actions not only affect a minimum of 22,000 jobs, but also affects 8-10,000 American jobs, while also hurting the bottom line of many domestic sources that use Canadian lumber. 

Response? 

Our first response should be to take action in the courts. Approach the WTO and use any NAFTA legislation in place to defend not only our position, but attack the rational on Trumps approach. If all goes well, American pressure will have him stand down before any further action is required by us, again because his own people utilize our lumber for important projects, such as real estate and home improvement along with various manufacturing.

Moving forward, if Trump uses this action toward Canada as a testing ground, which is likely, he may set this as a precedent to not only enforce the need to dismantle NAFTA, but also apply similar tactics to other trade commodities.

Short term, we can only continue to tackle this head on and use facts to disprove the speculation leading to these impulsive moves.

Long term, Canada needs to diversify our trade, which means we need to start approaching other large markets such as China and Europe, in order to not only find new buyers, but create new demand and make us less reliant on the Americans, at least until they smarten up and impeach Donald Trump.

If Trump does mess up NAFTA and do it improperly, he does risk many American jobs being lost or severely impacted by not only his actions, but also his words. The world may now have to consider joining forces in order to ensure that Trump is kept in check regarding trade.

While naturally, people fear China, for its trade tactics that manipulate many factors to lower the bottom line, any fear or attack on Canada is not only dangerous for the United States, but risks destabilizing peaceful and prosperous trade between two countries that have remained united and stable over the majority of their existence.

Keep an eye on here for more updates as information becomes available and prepare to dislike Trump even more.

Until Next Time! 


2 comments:

  1. "Interesting that no tariff has been implemented regarding Chinese imports, but that will most likely arrive later."

    "China … owns more than $1.24 trillion in bills, notes, and bonds …" of US debt. That's THEIR negotiating hammer. Have you ever tried to play hardball with your one of your major bankers?

    ReplyDelete
    Replies
    1. Good comment Cujo, as it is true that China does own a lot of US debt, not to mention a ton of gold reserves.

      There are people I speak to regularly, that believe the US is on the verge of bankruptcy and will get there much faster under Trump's Administration.

      However, I have a feeling Trump is going to get more bold as he moves along, since Canada is more of a dry run.

      In order to sustain his proposed tax cuts in the domestic market, he is going to have to incorporate some form of border tax on imported goods.

      He seems to literally be taking the Buy American to the most protectionist extreme possible.

      Delete