THE MORNING RANT: Why Didn’t Principled Free Traders Argue That Canada Would Benefit from Trump’s Tariffs, Since They Advocate that the U.S. Benefits from Surrendering to Foreign Mercantilism?

The great North American Trade War lasted almost a day before both Mexico and Canada bowed the knee. In the face of proposed 25% U.S. tariffs on goods imported from those countries, both Mexico and Canada quickly promised actions demanded by President Trump, specifically to stop allowing their borders to be a supply route for an army of narco-terrorists who use fentanyl as a weapon of mass destruction against U.S. citizens.

For the national economies of both Canada and Mexico, the United States is their major export market, and both are heavily dependent on access to the U.S. If a 25% tariff were imposed on our neighbors, it would obviously be devastating to them. Or would it?

Principled Free Traders have argued ad nauseum that tariffs only hurt the country imposing the tariffs, and therefore the United States’ appropriate response to trade barriers and tariffs imposed on us by countries such as China should be no response at all. Instead, they argue that we should just continue to import their goods, even though our exports are blocked. In other words, they argue that the U.S. should unilaterally surrender to foreign mercantilism. So why shouldn’t Canada unilaterally surrender to U.S. trade barriers and just live with crushing U.S. tariffs?

In the words of a prominent Principled Free Trader whom I often quote, “Trade isn’t fair. Americans should pray it never gets fair.” Well shouldn’t Canadians also then revel in the United States imposing unfair tariffs on their country. I scanned the Twitter feeds and bylines of some of the Principled Free Traders I follow and I couldn’t find anything resembling a think piece advising Canadians that “Trade isn’t fair. Canadians should pray that it never gets fair.”

The arguments that these unilateral free traders consistently make include:

• “Tariffs are a tax on consumers.” Yet there was widespread consensus that Canada would have to issue retaliatory tariffs on the U.S. Where were the free traders, and why weren’t they scolding Canada for imposing a “tax on its consumers” with their proposed retaliatory tariffs?

• “Consumers enjoy lower prices in countries that don’t impose tariffs.” Again, shouldn’t the free traders have been imploring Canada to preserve lower consumer prices by unilaterally surrendering to America’s tariffs?

• “Tariffs hurt the country that imposes the tariffs.” Japan and South Korea famously imposed protective tariffs against the US auto industry to keep American automobiles out of their markets in the post-war era and beyond. The free traders will argue that this only hurt those countries, as you can tell by how badly their auto industries are...thriving. Anyhow, if tariffs hurt the tariffing country, shouldn’t Canadians have punished the United States by doing absolutely nothing in response to American tariffs? That would teach us a harsh lesson according to free trade principles.

• “Outsourcing jobs to countries that impose tariffs helps consumers.” When an American plant closes and the jobs go to a foreign country with protective tariffs that block American goods, the free traders rejoice. If they were truly principled, you’d think they’d be consistent and suggest that Canadian manufacturers could simply move jobs to the U.S. to avoid our tariffs and gain access to our market. Of course, the free traders would never suggest that, because their objective is to eliminate American manufacturing jobs, not increase them.

• “People who lose their jobs due to offshoring can simply find better jobs.” Again, if Canadian manufacturers would just move their jobs to the U.S. to avoid the tariffs, then those displaced Canadian workers would have a great opportunity to go find better jobs outside of manufacturing.

Let me offer up here that I generally favor reciprocal free trade with Canada, and that I do not desire a nasty trade war with our northern neighbor. But I absolutely support Trump threatening (and imposing if necessary) a harsh tariff to compel Canada to stop allowing narco-criminals access to my country. I’m also pretty disgusted to have learned that despite the North American Free Trade Agreement, Canada has continued to block American dairy products by imposing high tariffs. “Free trade” that blocks American agricultural products is not what I understood free trade to mean.

Last weekend, before the U.S. – Canada tariff issue was (temporarily?) resolved, The Free Press published a story on just how painful the tariffs would be for Canada.

“I Don’t Think My Business Can Survive These Tariffs: Small-business owners in Canada are girding themselves for the pain of Trump’s trade war”

It’s hard to overstate the harm Trump-imposed tariffs could do to Canada.

Trevor Tombe, an economist at the University of Calgary who has modeled the impact of a 25 percent tariff on the Canadian economy, told me he sees “an economic hit to Canada that is roughly equivalent to your typical recession, resulting in a 2.6 percent drop in Canada’s GDP.”

That’s weird, because the Principled Free Traders have assured me that here in the United States, the destruction of as many industries as possible, and putting as many Americans as possible out of work, actually strengthens a country’s economy.

Small businesses are especially at risk. In 2022, 81.8 percent of Canadian small business exports went to the United States. These companies are so dependent on cross-border trade that Trump’s 25 percent tariff, coupled with Canada’s retaliatory tariffs, will likely affect 82 percent of them, according to a survey by the Canadian Federation of Independent Business.

Interesting. Apparently it would be deleterious to Canada’s economy if its industrial exports were eliminated. That certainly makes sense, but the free traders have told me repeatedly that their ideal is for the United States to import 100% of our products, with all of our manufacturing offshored. If losing the export component of the economy is good for the U.S., shouldn’t it also be good for Canada?

In fact, pragmatic Canadian businesses are already considering heading south: “With these tariffs, we will either sell the business to a U.S. company or move our business there,” Darrin Smith told me.

Huh? So if the tariffs are imposed, Canadian manufacturers would have to move manufacturing to the United States and create jobs here if they want access to our market? Apparently so…

[The founder and CEO of Canadian clothing brand Sophie Grace] told me that with a quarter of her sales coming from the U.S., she is one of those considering a move. To her, it is a simple matter of getting “behind the tariff wall,” she said.

I don’t want to see Canada harmed, and I don’t want to see Canadians hurting, but I’m glad that the threat of punitive tariffs compelled the Canadian government to respond to the national security crisis at our border. I hope that the 25% tariffs don’t ultimately have to be imposed.

That said, if there is a near consensus that “Trump’s tariffs” and a massive loss of jobs would be devastating to Canada, how is there an intellectual argument that when the same actions are taken against the United States in the name of “free trade” that it’s not equally harmful to our country?

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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