So it looks like Trump has actually done the thing we all joked about and started a feud with Canada. It was no secret that Trump wasn’t a fan of NAFTA but since he slapped a 20% tariff on Canadian softwood lumber, he has reignited a trade dispute that goes back decades.
But what does all this mean? Are we actually at war with the States? Is our peaceful, maple syrup-loving, sorry-saying existence coming to an end?
Don’t worry, this little spat isn’t anywhere near the caliber of Trump poking at North Korea, but the dispute has become a little bigger than we Canadians are used to seeing from our southern neighbours.
First, a little bit of history
This whole softwood lumber dispute started back when Trump was nothing more than a businessman way back in 1982. The Americans’ main beef with Canada is that most of our timber is owned by provincial governments meaning that prices are set administratively rather than competitively in the marketplace.
So Canadian lumber frequently ends up being cheaper than the American stuff which means American companies would rather import Canadian softwood lumber than pay more for American.
Now, governments don’t tend to like it when domestic companies use foreign supplies over materials from their own country. It’s just not great for the economy. So about once a decade, the U.S. tends to slap a tariff on Canadian softwood lumber to make it the same price as American timber in the American marketplace.
And about once a decade everyone goes to court until we all inevitably settle on a new (or basically the same) deal.
So what’s happening this time?
In the middle of April, the Trump administration with it’s “America First” rhetoric in mind, slapped a 20% tariff (yes, it was via executive order) on Canadian softwood lumber going into the States. That means that an American consumer is paying 20% more for the same Canadian lumber that is sold in Canada because the American government says so. With that in place, Canadian lumber loses its competitive edge and is basically the same price as the American stuff.
The worst part? This kind of feels like a direct attack from Trump himself.
“People don’t realize that Canada has been very rough on the United States,” he told reporters, “everyone thinks of Canada as being wonderful and so do I. I love Canada. But they’ve outsmarted our politicians for many years.”
So yeah, Trump makes Canada sound like an elusive Batman villain and he’s the caped crusader who is going to outsmart Canada and all the those before him by putting tariffs on our exports.
Well, what does this mean?
What it means is, we could have quite the trade war on our hands but we also might not. It all depends on how our governments choose to handle this. A trade war happens when countries retaliate against something they find unfair by putting tariffs and taxes on more and more foreign imports.
Trudeau has said he’s seriously considering banning imports of American coal which would effectively turn our current trade “spat” into more of a war. That doesn’t really bode well for either of us.
Basically for your average Canadian it means there will be Canadian-American tensions and likely an increase in the prices of affected products.
How naive we were to assume Donald Trump wouldn’t come for us up here in Canada.
Now, just to remind us how cool our Prime Minister is, let’s take another look at that Trudeau-Trump handshake: