Spencer Colby/The Canadian Press
Prime Minister Mark Carney loves to reach for hockey metaphors. He doesn’t always catch the right one.
Explaining why he was ditching most of the retaliatory tariffs against the United States, the PM said on Friday that “there is a time in the game when you drop the gloves,” to “send a message,” and a time when you “want to put the puck in the net.”
It’s a nice image, but it doesn’t capture what’s going on. Nor does it explain why Ottawa was left with no choice but to take a step back.
Canada’s best strategy in the first period, when U.S. President Donald Trump dropped the tariff gloves, was to respond in kind. The Carney government met tariffs with levies of our own. Depending on how the Americans responded, that could have remained the game plan for the second period, the third period and overtime.
But Canada can’t fight the U.S. by itself. We need everyone else to also go over the boards. Otherwise, it’s Lady Byng versus Ogie Ogilthorpe.
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And with the exception of China, other trading partners declined to dance with the U.S. They’ve already left the ice and hit the showers. The Europeans aren’t dropping the gloves. Nor are the British, the Japanese or the South Koreans. All reached trade deals with the Trump administration – one-sided deals where, in return for being hit with sweeping American tariffs, they promised to not retaliate, and to invest more in the U.S.
They agreed to allow Washington to punch them, and to not punch back. Instead, they took the blows, said thank you and quietly picked up their teeth.
Canada can stay out on the ice if we want. But at this point, it’s just us and Ogie Trumpilthorpe.
It’s also important to remember that countertariffs were never designed to be permanent. Their aim was always deterrence: to shock the Americans into retreating and returning to the status quo ante of low tariffs and free trade. If other countries had joined Canada, maybe better results would have been possible. But they didn’t.
The best economic models, such as those from the Bank of Canada and the Peterson Institute for International Economics, show that while U.S. tariffs will hurt our economy, Canadian retaliation will have an even bigger impact – on us. The price is worth paying if it pushes the Americans to change course. But the Trump administration hasn’t changed course, and the rest of the world, at least for the moment, has given up trying to force the matter.
So here we are.
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Mr. Carney keeps saying that the average tariff on Canada is “the best deal of anyone in the world right now.” It would be more accurate to call it the least-bad deal. U.S. tariffs on Canada are not as high as what other countries are facing – but they’re higher than they’ve been in generations.
The Trump administration is, for now, honouring the United States-Mexico-Canada Agreement. Or rather, partly honouring it. The U.S. President imposed a general 35-per-cent tariff, but USMCA-compliant goods are exempt and that covers nearly all Canadian exports.
This arrangement is unique. However, Washington continues to impose sectoral tariffs on some of Canada’s most important exports to the U.S.: automobiles, steel, aluminum, copper and lumber. These tariffs violate the spirit and the letter of the USMCA. As such, the Carney government is dropping the general retaliatory tariff while maintaining countertariffs in the affected sectors. It’s not an unreasonable position.
However, what Canada has mostly been doing is making concessions to the Trump administration – more spending on the border, more spending on defence, goodbye digital services tax – in return for nothing. But the rest of the world has made even bigger concessions, in return for nothing.
Canada’s partial reprieve from (some) U.S. tariffs is a less-bad deal than the rest of the world got, but the arrangement may be about to get worse. The blows to the Canadian economy have been softened by the USMCA, and Washington’s decision to partially respect it, but that’s not necessarily a permanent state of affairs.
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The Trump administration is clearly determined to make tariffs a large and lasting part of the American policy tool box, and to use them to force companies to shift manufacturing to the U.S. This is a threat to Canada, given that our manufacturing industries – led by automobiles – are integrated into American supply chains.
To the extent that Washington is willing to preserve and honour the USMCA – which would mean Canadian autos, steel, aluminum and other exports to the U.S. benefitting from lower trade barriers than competitors from the rest of the world – that close and integrated trading relationship could be mostly maintained.
However, if the Trump administration’s goal is boosting U.S. manufacturing by reversing continental integration, sidelining the USMCA, and hitting Canada with the same tariffs as the rest of the world, then the damage to our economy will be far greater. And the need to transform our economy and our trading relationships will be all the more urgent.
For now, Canada’s best bet is to rag the puck. Play for time. Hang on to the USMCA – and prepare for the possibility of its demise.