WNU Editor: I live in Canada .... so I have been exposed to how the media and this country's political class is reacting to President Trump's decision to impose tariffs. To say that it has been 100% hostile is an understatement. And am I surprised by all of this .... no. President Trump has been very clear on Day One on what are his views towards trade and U.S. trade deficits .... and how he was going to correct it. A little while back I gave a presentation to some people who pay me to listen to my views .... and on the issue of trade I was especially specific. President Trump does not like mega-trade deals. They are always rigid in form, and impossible to renegotiate in the future. And while this may have worked in the past when the U.S. was the economic super-power of the world .... it does not work today in a multi-polar economic world. What is best for the U.S. right now is to establish one-on-one deals with individual countries. In this scenario the U.S. is in a position to get what they want .... and more importantly .... be able to easily renegotiate it or tweak it in the future. This is nothing new .... China is doing this right now with all of its trading partners in Asia. But the U.S. is not stopping there .... this is where U.S. policy is headed. U.S. Trade Representative Robert Lighthizer is a unique person who has been put in his position because President Trump agrees with it. And Lighthizer's strategy is simple .... he wants to roll back trade liberalization and re-balance U.S. trade policy by forcing American multinationals investing overseas to repatriate their capital .... and it is succeeding .... Apple, tech companies to bring back $400 billion in overseas cash to the US: Estimate (CNBC). In this scenario, the combination of lower corporate tax cuts, de-regulation, and punitive tariffs is aimed at persuading U.S. manufacturers to relocate their production in the United States .... and they will. And while there are some in the U.S. who are voicing their opposition to these tariffs .... the problem that they have with their gloom and doom warnings is that the U.S. economy is booming, posting job numbers and real income growth that has not been seen for years.
In closing .... the best strategy right now for countries like Canada is to realize that the old way of doing business and trade with the U.S. is coming to an end. And to also not expect a Democrat controlled Congress after the election to make it better .... in fact I predict that they will support President Trump's trade policies because of their blue-collar-union base, unlike the many Republicans who still favor free trade. As for the future .... the only thing that I do not know is on how long will it take for Canada, Mexico, the EU, and other countries to realize what is happening (or if they already know it, when to make it public). But I do know one thing .... by whining about it as the Canadian Prime Minister is doing right now (see above video) .... it is not going to be helpful. No one likes a whiner .... especially this White House.
4 comments:
Great analysis WNU Editor, good to know how things are perceived there in Canada. However, since Canada and the EU are more socialist based economies, I fear they will resist and create barriers to this change. in the end, we might see compromise just because we are the largest economy and they need us.
During Trump’s QnA yesterday he confirmed he preferred to break NAFTA into two separate deals, one with Mexico and the other with Canada, so you got it right.
I don’t think Trump is engaging in polemics when he threatens to withdraw from the WTO, it fits into a ridge bureaucratic strait jacket on trade that he dislikes.
Also Trump doesn’t turn the other cheek as so many past Presidents did. Screw Trump and you’ll pay a price, I think Merkel understands that now. The spying scandal of the Obama administration includes misconduct by foreign leaders too, I think Trump already has a list.
Michael. No one sees the situation in Canada as I see it. No one. In places like Russia and China .... the media and governments in both countries understand what Trump is doing. Especially in China .... where they have positioned themselves (successfully so far) to resist these U.S. moves by promising to purchase more U.S. goods and resources.
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