Canada hosted the G7 summit in La Malbaie, Quebec this past weekend, bringing together the leaders of the world’s seven most advanced economies and leading democracies. And to close the conference, all leaders – including Prime Minister Justin Trudeau and U.S. President Donald Trump – all agreed to sign a communiqué that touched on current issues surrounding trade. It reads,
“We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements. We commit to modernize the WTO to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.”
But the agreement comes at a time when tensions are running high between the U.S. and Canada with regard to trade. Just last week, the U.S. decided to levy 10 per cent tariffs on Canadian aluminum and 25 per cent on Canadian steel. And in response, Canada is commencing its own retaliatory tariffs starting July 1, 2018.
Following President Trump’s departure from the summit, Prime Minister Trudeau shared his stance on the matter at a press conference. He remained that Canada would be strong in its reaction to the U.S. tariffs. And though he said he found the move “kind of insulting”, Canada will continue imposing its own tariffs. Despite the communiqué being agreed upon, it changed nothing about the tariffs already levied on Canada.
Nevertheless, Prime Minister Trudeau’s remarks set President Trump off and led to Trump’s advisors attacking Prime Minister Trudeau on Twitter and in the news – calling him a “back stabber,” “sophomoric” and “meek.” More notably, top White House aide Larry Kudlow told CNN that there was a “special place in hell” for foreign leaders like Trudeau.
Why should I care about these political hissy fits?
It may seem like the back-and-forth jabs in the political arena don’t affect your bottom line, but they do.
If the tariffs are permanently implemented, a long-and-wide ranging list of items will become more expensive. Of course, anything in an aluminum can is made of steel, but consider the whole lot of other things that may be affected by these tariffs, from yoghurt and licorice to jeans, beer and cars.
- Iron and non-alloy steel in ingots
- Roasted coffee
- Prepared meals
- Maple syrup
- White chocolate
- Cucumbers and gherkins
- Jams and jellies
- Fruit purees
- Soy sauce
- Tomato ketchup
- Prepared mustard
- Salad dressing
- Mineral waters
- Hair spray
- Shaving and after-shave preparations
- Soaps and face washes
- Automatic dishwasher detergents
- Festive décor
- Tableware and kitchenware
- Plastic household articles
- Toilet paper
- Insecticides and fungicides in packages under 1.36 kg each
- Plywood (other than bamboo), veneered panels and similar laminated wood
- Levi jeans
- Stoves, ranges, grates, cookers and barbecues
- Pens and markers
There’s also a threat to our Canadian dollar and a long-term risk of interest rates staying lower longer, in addition to job losses, especially in southern Ontario.
The United Steelworkers put out a statement last week that said, the move “threatens thousands of jobs in both countries,” and that “the government of Canada must pursue every means at its disposal to defend fair trade and the tens of thousands of Canadian families whose livelihoods depend on the aluminium and steel sectors.”
Moreover, the Bank of Canada could hold on a rate hike, as trade tensions continue, because a stronger Canadian dollar would only make it harder for businesses to do any cross border trade. But leaving rates the same could mean a weakening Loonie. Lower rates also mean a long term effect on our housing market, as Canadians continue to borrow more at rock bottom rates.
But on the semi-bright side, the rest of the G7 leaders and others around the world still believe globalization is a good thing. All are moving towards more free trade because they understand protectionism is bad for business. And if President Trump truly does not care about that, it may turn out that the ones who lose the most and pay the highest price are, indeed, the people of the United States.