Trade talks between the government of Mark Carney and the Trump administration have broken down and a 50% tariff has been imposed on a wide range of Canadian goods. Major counter tariffs on U.S. goods are set to take effect next month.
With Canada’s enormous reliance on trade with the U.S. and the deep integration of the two economies, this is a hugely impactful development. Undoubtedly, this sharp manifestation of Trump’s America First strategy has dire implications for Canadian capitalism and it will impact the country’s working class severely.
The intensification of the trade war raises questions around the strategy that the Canadian capitalist class and its political agents will employ. We must also consider just how unions and social movements should respond to patriotic appeals and the refrain that ‘we are all in this together.’
Scale of the tariffs
On 22 August, Global News reported that Carney had recalled the Canadian negotiating team that had been conducting trade talks with U.S. representatives. Though there had been strong hopes of an agreement, Carney stated that he was ‘walking away from a bad deal’.
Information is far from complete at this point but some of the key unresolved issues that underlay this rupture have emerged. When it came to the deeply integrated automotive manufacturing sector, the present talks had unfolded with a 25% tariff on Canadian-made vehicles in effect.
Trump had repeatedly declared that his intention was to induce manufacturers to set up operations south of the border. We learn that ‘there had been progress on an approach to how to integrate autos that ultimately fell apart.’ It happened because ‘the two sides disagreed over “the treatment of Canadian content” in vehicles, while the United States was only willing to agree to a trade deal on cars and would not extend it to medium or heavy vehicles like trucks.’
It also appears that Trump’s negotiators wanted to allow U.S. exporters and investors to disregard French-language rules that have been developed in Canada, with its two official languages. Carney presented this as an unacceptable assault on Canadian sovereignty.
Finally, and perhaps most decisively, it appears that the Trump administration wanted to limit Canada’s ability to forge trade deals with other countries and control Canadian decisions on any tariffs it might impose on third parties. The Carney government has placed a considerable emphasis on trade diversification and the U.S. goal is to impose harsher trading terms on Canada, while preventing its attempts to broaden trading activity.
The general strategic thrust is clear enough but it seems that there were tactical differences within the Trump administration on how far to try to push the Canadian side into making concessions. Politico reports that ‘the negotiations also exposed friction between [US Trade Representative Jamieson] Greer and U.S. Commerce Secretary Howard Lutnick’s respective public policy spheres.’
Such discord and erratic conduct are standard behaviour within the Trump administration and it may have led to a situation where last-minute demands and inflexibility created a situation in which the Canadian side was faced with steeper concessions than it could tolerate and was compelled to walk out.
Though the Trump administration wanted to extract as much as possible from the Canadian negotiators, it is unlikely that it will welcome ‘a dramatic escalation into a trade war between two countries with deeply integrated supply chains, one that could threaten more than $1 trillion in North American trade and, with it, could continue to raise economic pressure ahead of U.S. congressional elections in November.’
In any event, this trade war is raging for the present and a 50% tariff on some 5% of Canadian goods entering the U.S. is now in effect. Hardest hit are motor vehicles, dairy products and alcohol but the measures may extend beyond this and Canadian retaliation will lead to U.S. reprisals.
Such escalation is already underway and, according to City News, ‘Carney said Canada will match Washington’s new tariffs dollar-for-dollar and that the levies will be targeted at sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. He said more details on those retaliatory measures, as well as supports for affected sectors, will be announced in coming days.’ These measures are set to take effect on 8 September.
Canada’s provincial governments have expressed their support for Carney and this comes from across the spectrum of the country’s political establishment. Doug Ford, the Conservative premier of Ontario put on a spirited display of defiance. According to the CBC, he declared that ‘Trump could “kiss my ass” as the two leaders exchanged blows on Monday, with Trump referring to the premier as “Flunky Ford”.’
Though in somewhat more subdued terms, David Eby, the social-democratic premier of British Columbia, also rallied to Carney’s side. He expressed full support for counter-tariffs and deplored U.S. efforts to render Canada the ‘51 st state.’
The only somewhat discordant note came from Alberta premier, Danielle Smith, who took a more cautious approach. Reflecting the fact that that province’s powerful fossil-fuel interests have notions of a separate deal with Trump, she expressed regret that the negotiations had broken down and added that ‘I’m really hopeful that some constructive conversations begin because boy , a tariff war is painful.’
Unequal contest
A bruising round of measures and countermeasures are now underway. As we might expect, Carney and his provincial counterparts are waving the flag furiously and talking very tough. They may calculate that a short round of hostilities will convince the Trump administration to moderate its demands. This disruption will hurt the U.S. but it will hurt Canadian capitalism a lot more and a return to the table can’t be postponed that long for all the present patriotic bluster.
Trade diversification to an extent that could meaningfully reduce Canada’s dependency on the U.S. as a trading partner is obviously impossible. Moreover, while trade with Canada is a major question for the U.S., for Canada’s capitalists, it is a fundamental need that must be preserved, even if a very high price is exacted in any negotiations. The present defiance of Canada’s political leadership is likely to be short-lived as the unequal contest plays out.
As an entry-level member of the G7 that is dependent on trade with the U.S. and that shares a border with it, Canada is exceptionally vulnerable. In this regard, the impact of the America First turn on Canada holds lessons for other countries that must deal with a declining dominant power that is now focused on immediate self-interest rather than being the cornerstone of a ‘rules-based’ world order.
A 23 August article in The Guardian concludes that ‘the calamitous collapse of trade negotiations between Canada and the United States is a warning to nations worldwide that pursuing any kind of dialogue with the current U.S. administration is doomed at the outset.’
The article further argues that ‘no matter the closeness of the historical relationship, the American administration has signalled that it now prioritises its interests above those of some sort of global economic coordination or harmony.’ If that is the case, then we may conclude that the trade war between the U.S. and Canada, driven by the Trump administration’s effort to extract harsher terms from its weaker major trading partner is very much the writing on the international wall.
Unions and social movements in Canada should certainly be aware that a declining U.S. hegemon has gone over to a reckless global extortion racket and, in the case of countries like Venezuela, Cuba and Iran, it is pursuing a course of ‘gangster imperialism’.
While implacable hostility to U.S. imperialism and the Trump administration in particular is essential, however, it would be a huge mistake to subordinate working-class needs and demands to the interests of Canada’s capitalists. They will be only too pleased to draw us into a patriotic alliance that is supposedly based on a shared ‘national interest’.
The president of the body that represents the bulk of trade unions in Canada, the Canadian Labour Congress (CLC) recently posted on social media that ‘the road ahead will be tough. But we’re all in this together. We must use our leverage to force Trump to back down.’
This is an entirely incorrect position to take and one that would have disastrous consequences. The notion of shared interests with Canada’s capitalists and an alliance with them under the leadership of former central banker Mark Carney is quite dreadful. I’m not suggesting that it’s impermissible to put forward demands with regard to trade negotiations but Canada’s trade unions can’t be reduced to a cheering section for Carney or function as his loyal advisors.
As I have outlined previously, the Carney government has already made it entirely clear that its objective is to impose the burden of the trade crisis and the squeeze on profits that it will entail on the working class. This class-war agenda of brutal austerity and other regressive measures will be greatly intensified now that the trade crisis has gone over to punishing hostilities.
There is a great need for an independent working-class strategy in the present situation. Donald Trump is certainly our enemy but so too is Mark Carney and we must resist the inevitable attacks that come from ‘our’ capitalists and their political agents.
If we are to forge an alliance, let it be with those in the U.S. who are mobilising against the Trump administration and the impacts of its tariff measures. When it comes to workers and communities under attack south of the border, we really can say that we’re all in this together.