How to Fight a Trade War

The Week Ahead

March 5, 2018

As we warned some months ago (see “Afta’ NAFTA” November 2017), the NAFTA talks were only one front, and not necessarily the key one, in a trade war heating up across the 49th parallel. The latest salvo red from the White House, a tariff on steel and aluminum with no sign yet of an exemption for Canada, was one that was already being loaded when we wrote our report, so it’s surprising that investors are so surprised about it. There’s a last ditch hope that Canada will gain an exemption, but we’re already dealing with special tariffs on lumber, paper, and pipes.

What’s the logical response in Canada? Slapping a tariff on US goods is one option, although the particular US provision being used in the metals sector is not one that automatically grants Canada that retaliatory right under the WTO. We can buy our military equipment elsewhere, get tough on US exports to Canada that have implicit subsidies, and say no the next time America asks Canada to support a military project, as we did in Afghanistan.

Read More…