America Can’t Afford a Trade War With Canada

American Power

This episode of American Power examines the escalating trade tensions between the United States and Canada under Trump's administration, foc

Key takeaways

• The U.S. and Canada have deeply integrated economies, with shared supply chains in industries like aluminum and automotive manufacturing.
• Trump's recent trade threats contradict his own negotiated USMCA agreement, undermining long-standing economic cooperation.

Main topics

• U.S.-Canada trade relations
• Trump's tariff policies and their consequences

Notable quotes

'It makes no sense whether it's the Canadian government, whether it's the US government. And at this point, it's... the vast majority of the U S government causing the problems when we do things like that, it hurts everyone.'

Conclusion

The episode concludes that Trump's trade war with Canada is economically irrational and politically

Transcript preview

Speaker 1 (0:15) You're listening to American Power. I'm your host, Nat Towson, stand-up comedian, speech writer, many other kinds of writer, and most likely to get me screamed at on the internet for an opinion that no one really disagrees with, podcast host. I'm joined, Speaker 2 (0:29) as Speaker 1 (0:30) always, by our panel of experts, our expert on foreign policy, the military, and today, economic policy, Chad Scott. Speaker 2 (0:37) Hey, how's it going? I'm just adding things to my title here just to make me feel good about. Being a podcaster. He Speaker 1 (0:44) did just say off the air, not an expert. And I am throwing him officially under the bus. Joining me as well, as always, of course, you know, Mr. Global, our expert on the energy industry, all things oil and renewable, etc. Mr. Global, Matt Randolph is here. How's Speaker 3 (1:00) it Speaker 1 (1:00) going, Matt? Speaker 3 (1:01) Matt? Speaker 1 (1:02) Yes. Speaker 3 (1:03) When you see the Southern Cross for the first time, you understand why you came this way. I've been listening, obviously, to some Crosby, Stills, and Nash today, which means I'm in a great mood. That music from back in the day always puts me in a great mood. And I was listening to it right before we hit record. And now I can't get the words out of my head. So if I blurt something out, just understand. Speaker 1 (1:25) So our first topic of the day is you're riding on the Marrakesh Express. And wait. Sorry, sorry, sorry, sorry. Speaker 1 (1:34) Something about that harvest moon? No, sorry. We want to talk about economic policy. Today, we are going to talk about trade specifically and Trump's trade policy. What's he doing? Specifically, our relationship with Canada obviously has been fraught since the beginning of this Trump administration with a history of retaliatory tariffs. Now, Trump is threatening to hike up, I believe, auto tariffs to 50%. Canada potentially retaliating. I'm hoping we could take a look at the U.S. relationship with Canada. Can we go back in time a little bit and look at how our trade relationship has developed over the years? Chad, would you lay that out for us a little bit? Speaker 2 (2:16) Yeah, for sure. So this, obviously, because of our it's the longest undefended border in the world, we have a pretty interconnected relationship with our Canadian friends. But officially, just kind of going back. A lot of this started back in the Reagan and Canadian Prime Minister Brian Mulroney. They signed the U.S.-Canada Free Trade Agreement back in 1988, and it took place or took effect in 1989. And it was meant to eliminate kind of a small terrafore that was happening between each country. And they wanted to slowly phase out trade barriers, draw down tariffs. And then over that five-year period, it expanded a bit into what eventually became NAFTA, the North American Free Trade Agreement in 1994. And we decided to bring in Mexico into the system, creating this incredibly integrated North American economy. And it was hugely powerful. But then you have Donald Trump. He came along and argued that NAFTA was a terrible deal and forced Canada and Mexico back to the negotiating table. Speaker 2 (3:22) Result was the USMCA, which is the Mexico-Canada Agreement. So US-Mexico-Canada Agreement. And this was something Trump negotiated and he signed and everyone celebrated it. It was technically not much different than NAFTA, but Trump talked about it as a historic improvement, mainly for the United States. It entered into force in 2020. So from like 1994 to 2020, we were operating happily under NAFTA. The USMCA did not end free trade between Canada and the United States. It just kind of updated it. It strengthened the automotive rules, labor provisions, agriculture, digital trade enforcement, things like that. So we were able to kind of just codify a little bit more. It updated a lot of it for the digital age as well. That was a big portion of it. And now he weirdly threw out his own policies, trying to break down the whole thing. Even though he negotiated the rules for the USMCA, he now thinks it's not worth it. And so the negotiations have collapsed once again between Canada and the United States. And each side is now saying the other side is at fault. U.S. Trade Representative Jameson Greer says negotiations had reached some sort of an agreement on Tuesday night to announce a path forward. But then apparently the Canadians wanted additional concessions on future decision making. Canada says the opposite happened. Mark Carney, who's the leader of Canada, said the United States changed the terms of some of the original discussion on some critical things like those, the automobiles, lumber, stuff like that. And he said the Americans, quote, asked too much and they offered too little. And so it broke down. To be fair, this was an agreement that was being negotiated in both sides, and it was Canada that ended up walking away at this point. That being said, a lot of the reason Canada has walked away is because the United States, I think, in my opinion, is being really unreasonable here. There are certain things that Canada builds for the United States, specifically in Ontario. They built Ford F-350s, the GMC Silverados, various trucks that... Apparently, there was arguments over tariff reductions for those, and it just wasn't sitting right with the U.S. or Canada. And so they walked away. And as you said, it led to Donald Trump going to his preferred medium of announcing official business, True Social. And now we are looking at a situation where there's a pretty, what I would say, severe trade breakdown. This is almost unprecedented since. before the Reagan administration. And I would argue that probably Reagan is rolling in his grave at this point, because these are things that are good for the United States and Canada. We should just be working together. For instance, our aluminum industry, it's basically the same industry. The supply chain for aluminum is basically the exact same. So when we put tariffs on it, all we're doing is hurting each other. So it makes no sense whether it's the Canadian government, whether it's the US government. And at this point, it's... the vast majority of the U S government causing the problems when we do things like that, it hurts everyone, not just trying to hurt Canadians. It hurts Americans too. And like I said, I can get into that into the future, but I do want to get Matt's thoughts on this as well. Speaker 1 (6:45) Yeah, Matt. Speaker 2 (6:47) My thoughts? Speaker 1 (6:48) Yeah, he wants your thoughts. Speaker 3 (6:51) My thoughts, Donald Trump got tired of hearing about the Iran war and his base gets off on watching him pick on people. And I think this is nothing more than that. He doesn't know the first thing about trade. Nobody in his administration knows the first thing about trade. If you want to know what they know about trade, it's about the same as any average Trump supporter. They're dumber than a post. They don't know what they're doing. And this is all another just extension of the Trump reality show that is his administration. And I agree with Chad. It's very damaging and it's stupid. It's stupid. Like unbelievably stupid. Speaker 1 (7:28) I mean, Speaker 3 (7:29) why? Speaker 1 (7:30) Why? Why institute? That's very, very strong opinion. Why? I Speaker 3 (7:34) mean, it's a very factual opinion. Speaker 1 (7:36) OK. Facts and opinions are two different things. It's Speaker 3 (7:38) a Speaker 1 (7:38) fact-based opinion is what you're saying. If we are not going to behave like the far right, we need to distinguish between those two. However, I tend to agree with you. How much of this was... Like you're saying, you know, people did not know the damage this was going to cause. To some extent, we're talking down to the degree of people didn't understand how tariffs function. Should we spell this out? How a tariff functions for our listener base? Like, I genuinely think that was part of the PR of the beginning of this administration was, oh, we're not going to we're not going to negotiate the way we used to. We're going to put tariffs on our trade partners. Where did that shift come from? I Speaker 3 (8:17) feel like our listeners know exactly how tariffs work. Speaker 1 (8:21) I mean, if they didn't a year ago. If Speaker 3 (8:23) you're new, I'm sorry. If you're listening Speaker 1 (8:25) to this podcast, you're interested enough to know. You're probably right. I'm just trying to be the everyone. I'm just trying to make sure we know where we're all at. But let me ask a slightly more informed question, which is where did this preoccupation with disruptive tariffs come from? It's like a very specific technique that he wasn't using or policy that he wasn't using in that way in his first administration. And spite motivated or otherwise, why tariffs now? Speaker 3 (8:48) You've heard people talk about the Donro doctrine and Speaker 1 (8:52) how Speaker 3 (8:52) it's so familiar to the Monroe doctrine. But it's not. It's really not. Now, I'm not an expert in the Monroe Doctrine, but I know basically he viewed the entire Western Hemisphere as like this unified, just big, like superpower, basically. That's the way I look at the Monroe Doctrine. But what Donald Trump does is not that. He's attacking the people in his own hemisphere. Like he's not building coalitions in our hemisphere for all of us to have this huge, you know. to have a superpower hemisphere, he's attacking them. He's doing what I would think would be the opposite of what Monroe envisioned. And I don't know why he's so fascinated and obsessed with Monroe anyway. I don't know where that comes from, but that's what I'm looking at. Speaker 1 (9:41) Probably because it's Speaker 3 (9:42) a Speaker 1 (9:42) historical example of pro-Westernism in some ways associated with a president that... has you know history and respect associated with his name because ultimately you know it was you know western hemisphere non-interference right i mean i also would not profess to be a complete expert on the monroe doctrine but essentially the idea and it is not a modern political theory it is clearly you know of a different era but essentially it was about mutual non-interference within the Western hemisphere from America and European countries. And I think if you're someone who, I mean, we've talked about this before, but Donald Trump's feelings on being a globalist and anti-globalist are like polar at any given day. But if you are trying to portray yourself as this America first, or is this pro-West anti, you know, like anti-Middle East and, you know, for whatever, whichever bigotry he's stoking at any given time or, or patriotism he's trying to stoke at any given time. I do think that like, granted an under-informed view, but the idea of looking at like, oh, I'm not, I mean, he likes being the disruptor, but oh, I'm being noble. I'm being like James Monroe. Like there's historical precedent for this. Western countries got to, you know, white countries, we all know, but Western countries got to stick together. And yet 50 % tariffs on Canadian automobiles and manufacturing. So I don't think that's quite following in the same philosophy. Not that I support the West has got to stick together. Well, I would say that Speaker 3 (11:09) he's... Oh, go ahead, Matt. I just, real quick, he's not anti-globalist when it comes to getting OPEC to produce a lot more oil to drive down prices in the United States or when he's trying to bring in hundreds of thousands of tons of mystery meat from God knows where. Speaker 1 (11:23) Like, he's not anti-globalist. Speaker 3 (11:25) No, he's a ruthless Speaker 1 (11:26) capitalist. He's not anti-globalist until he needs to convince anti-globalists to sign off on his agenda. I mean, that's what it is. Like, he knows that there's that, like... anti-immigration, you know, he could stoke that part of his base. Those are the most loyal people, right? But ultimately, he's a capitalist and he would, like any other capitalist, rather pay less for things, regardless of the quality. Speaker 2 (11:47) Well, and I would say Trump is more like a different president when it comes to his tariff approach, and that's Hoover, which is not a president you want to be associated with in general. I mean, if you remember, he was basically the one that drove the Great Depression. But kind of broadly— Speaker 1 (12:04) Then how Speaker 2 (12:04) come he made all those Speaker 1 (12:04) little villages? Hoovervilles. I know, Speaker 2 (12:06) the Hoovervilles? Yeah. Speaker 1 (12:07) Oh, you mean he built housing? He provided for housing? Yeah. Speaker 2 (12:10) So when you look at the way Trump—Trump treats tariffs as leverage. He has this basic theory that if you want to have access to the U.S. market, which is the biggest market in the world, if you want to sell your stuff here, if you want to join our stock market, our equities services, whether it's the New York Stock Exchange or NASDAQ or S &P or whatever, he says you get to play by our rules. And when he says our rules, it means his personal rules. But the problem is when he... Yeah, exactly. Just Speaker 1 (12:41) to be Speaker 2 (12:41) clear, those are Speaker 1 (12:42) not ever set in stone. Speaker 2 (12:44) Yeah, and he changes his mind consistently. And actually, I did one of the future American Power Extras we're going to do probably next week. I'm going to talk about his contradictory foreign policy. But the reason I say Hoover is because Hoover is associated with what was called the Smoot-Hawley Act. And it was something that was put in place where tariffs were supposed to be this new great... endeavor that this country took upon to essentially make it so that we Americans would have to pay less taxes. This happened in 1930, and it raised tariffs on thousands of imported goods. And it happened just as the Great Depression was taking hold. And so all of our trading partners, and we're seeing this now with Canada and China, all of our trading partners retaliated, though. So international commerce. completely contracted and it dramatically dragged the economy down. And U.S. exports, especially when it came to farmers, were really hit really hard. And so during this time, because of the Smoot-Hawley legislation, U.S. exports fell by roughly two thirds between 1929 and 1933. And therefore, world trade collapsed and it led to the Great Depression. Ever since then, we have always seen tariffs as something to kind of Keep a distance. Yes, they're good if there's overtly nefarious practices like China stealing intellectual property, for instance, then tariff some things, hit them, punish them. But just using tariffs to broadly say this is unfair and we don't like the U.S. is supposed to be an open market for a reason. That's why people come to us. We are a secure open market. And what Trump is doing is now going back to the same. types of legislation, the same types of policies that essentially ran us into the Great Depression. And as a businessman, it blows my mind that he doesn't recognize this. I think it's just because he's a failed businessman, let's be honest. And so he's trying to say tariffs are amazing, but every economist... Since ever, every president since the Great Depression has said, no, there's better ways to inflict some sort of fairness doctrine. And a lot of it has to do with free trade agreements, because these countries, they do want to come trade with us. Canada wants to trade with us. We want to trade with Canada. But I think it's becoming political. It's like, and as Matt said, it's a political move where they have Carney who upsets Trump. And it's just like how he how the South Koreans decided to not help us in Iran. So now he's like, I'm upset at them. So I'm going to go ahead and not have this or I'm going to shorten this exercise. It's all this personal diplomacy stick that Trump has, and it doesn't work. And so when you have the Canadians not to Speaker 1 (15:43) disagree with you, Chad, but I would I would hesitate to even call that political so much as like. personal, rightful. No, it's not political in the sense of like, he's not making a calculation of like, ah, now we've got them on the ropes where we want them. It's like, no, these guys, they didn't help us. They made me look bad. Yeah, you're exactly right. Speaker 3 (16:00) That this all restarted when Canada posted better jobs numbers than the United States. And he is that petty. Like, I wonder if that was the thing that triggered this. Like, Canada had a good jobs numbers month. We had a terrible one. Two days later, we're in a trade war with Canada. And that he is that kind of a child. And Speaker 2 (16:23) I will say that I don't think Canada is in a position where they can win this quote unquote trade war. Speaker 2 (16:34) They're facing a scenario where it's almost like the Iran situation. We're not necessarily physically attacking Canada, but this is a bigger power trying to leverage unfairly over a smaller power. So they're rallying around the flag. Carney is hugely popular in Canada right now. Trump is hugely not popular in the United States. And so what's happening is even though the United States has probably on paper. The ability to really hurt Canada, mainly because geography is Canada's biggest problem. I mean, they just 75 % of their trade goes through the U.S. in some form or fashion. But politically, Carney can look at his people and his small majority, he has like two to three seats in their parliament in his favor, and say, it's us versus them. And they're going to rally around Carney, even the conservatives. are rallying around him in that country. And that's something that they're going to be able to ride out longer than Trump is because even Republicans right now are like, this is going to hurt us. This is going to hurt us in automobile industry. This is going to hurt us in agriculture. This is going to hurt us in lumber. I mean, they provide us the core things. for like fertilizer and Matt can speak to energy. God. And we talked about this briefly. Could you imagine? I mean, what are your thoughts on that, Matt? What if they just say, this has gone too far. We're going to start shutting off the electricity that we share with you guys. And we're going to start taking our, your energy away. I can't imagine. Speaker 3 (18:03) People in the United States have no idea how much electricity we get from Canada. And when I hear Doug Ford talk about shutting off the electricity. So just to paint this picture for you, because a lot of people probably think it's just. some states along the border, but it's not. It's much more bigger than that. There's about five or six states that get an enormous amount of electricity from Canada. Northeast corridor, you know, like New York, Maine, Vermont, and then Michigan, Minnesota, and then Washington State out west. But all total, there's 22 different states in the United States that get some electricity. from Canada and over half of the U.S. population. And so when they talk about cutting off electricity, you're talking about impacting about 170, 180 million Americans, about 50 million of which would lose power completely, just a blackout. The remainder, the remaining 120 million or so would see their utility bills double or triple. Because they would have to find new sources of electricity. It would be in very tight supply and, you know, the cost would skyrocket. So for Canada to suggest we're going to cut off the electricity, I think, or Doug Ford anyway, I think a lot of people think, well, that can't be that bad. Oh, it can be that bad. Now, the thing, the reason I think that's something that would absolutely never happen. is that we send, we don't send as much electricity to Canada as they send to us, but we do send a very significant amount, about two-thirds of what they send us. So we would just immediately respond and do the exact same thing, and Canada would be in just as bad a shape as