Ted Carmichael
Special to Niagara Now/The Lake Report

How should Canadian governments and citizens respond to the Trump administration’s threatened tariffs? Even if Canada’s commitments on fentanyl and border security put the threats on hold, they are not withdrawn.  

My views are not the consensus, but my opinions are based on a lifetime and career that has involved Americans both as close friends, colleagues and business partners. 

I have worked in economic policy research, in the Canadian oil industry, for U.S. and Canadian financial institutions, and for a large Canadian public sector pension fund. In all these positions, I have benefited from working with Americans. 

The Trump administration is obviously headed by a bombastic man. He has, however, surrounded himself with an economics team that is accomplished and intelligent, including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and the head of his Council of Economic Advisers, Stephen Miran.  

This team agrees with President Donald Trump that the United States has not benefited from the multilateral trading system put in place in the post-Second World War period.  

They believe the U.S. has given tariff-free access to countries that do not provide similar access to America. They also believe the strength of the U.S. dollar derives from its role as the world reserve currency and that this penalizes U.S. exports and contributes to large U.S. trade deficits.  

These views are very debatable, but they are the views of a president who has won a historic election victory and whose party controls (narrowly) both the House and the Senate.  

Many Canadians see Trump as a bully, but it is perhaps better to see him as a high-stakes poker player with a big stack of chips. The Trump administration is moving quickly to begin to restructure the global trading system while it is in a strong position to implement change.  

They intend to do that by raising the U.S. effective tariff rate from about 2 per cent to perhaps 15 to 20 per cent. To accomplish this, they must tariff their largest trading partners, Mexico, Canada and China, and all their other trading partners as well. 

They know that doing so will create short-term economic disruption, both for trading partners and for U.S. businesses, but they believe that companies will adjust, and the result will be worth it for the American people in the years ahead. 

So, how should our government respond? Lecturing Americans that this policy will cause them short-term pain won’t work. They know that.  

Retaliating with counter tariffs and threats of cutting off Canadian energy may put some pressure on Trump but will hurt Canadian consumers and workers, perhaps even more than Trump’s tariffs. 

In my opinion, Canadian governments should limit retaliation and focus on building a more competitive economy with greater access to domestic and global markets.  

This would mean breaking down interprovincial trade barriers. It would mean providing incentives for business investment to boost productivity and building infrastructure, such as pipelines and ports, for moving Canadian goods to our coasts for increased access to global markets and diversification of our trade.  

At the same time, our governments should take U.S. complaints seriously. They should work strenuously, alongside our U.S. counterparts to improve border security, to limit the production and flow of illicit drugs, and to combat money laundering. 

They should move quickly to negotiate other trade irritants, including restrictions on dairy trade and rules of origin in auto trade. They should act fast to get the Trump administration to the table with Canada’s outstanding trade law professionals and negotiators for another redo of NAFTA.  

The objective should be to secure mutually beneficial, tariff-free access for trade within North America. Canada is an affluent market with rich, abundant natural resources and human capital that greatly benefit the U.S. economy. These are our best bargaining chips. 

And what should Canadian citizens do? Boycotting U.S. products and travel can easily backfire if Americans do the same to us. Instead, let’s reach out to Americans and actively inform them of the essential Canadian goods and services that help make their economy work efficiently. 

Here in Niagara, let’s open the eyes of our American friends to our world-class wine, hospitality and lifestyle. Let’s not allow feuds between our political leaders to become feuds between our citizens.   

Ted Carmichael was formerly the director of research at the C.D. Howe Institute, the chief Canadian economist at JP Morgan and managing director at OMERS Capital Markets. He is also a proud, seven-year resident of NOTL and an avid member of the WOOFs at the Niagara-on-the-Lake Golf Club.