Understanding the American rationale for tariffs to help Canada win at the negotiating table...
They have their reasons for what they are doing, trying to understand them could help us win.
Don’t the Americans understand that tariffs are bad?
That is one of the most asked questions we’ve heard from Canadian politicians and in the Canadian media over the past year or so. There is an assumption among Canada’s Laurentian Elite that the Americans are simply mistaken in pursuing a tariff based economic policy.
Don’t they remember Smoot-Hawley?
I’ve been arguing for over a year now that in order to understand what the Americans are doing, we must understand why they are doing it.
Once we have an understanding of why they are acting the way that they are, we can develop an appropriate response. Sadly, that’s not the approach most of our leadership has taken, they have assumed Trump and his team are economic illiterates, people who don’t understand the global trading order and they must be resisted.
No, they aren’t economic illiterates; some of the people directing Trump’s trade policy are very well read, smart people. They happen to have a different view of the benefits and consequences of the current global trading order.
You can read this in books like No Trade is Free by Robert Lighthizer, the former U.S. Trade representative in Trump’s first term. It’s also expressed in the paper written by Stephen Miran, an economist, Trump advisor and recent appointee to the Federal Reserve.
I’ve been advocating that people read these and understand them for about a year now. I discussed both of them with Ian Lee and Carlo Dade in one of the most popular episodes that the Full Comment Podcast has ever seen. The episode was recorded at the end of January 2025, days after Trump’s second inauguration, and it still stands today.
Of course, if you want to hear directly from the horse’s mouth, you can watch the video below.
A follower on X tipped me off to this keynote address by the current U.S. Trade representative Jamieson Greer. It wasn’t on the big stage at Davos; it was part of the World Economic Forum but held at America House on the sidelines of the conference.
It may be the most important speech given there for Canadians if they want to understand what the American are doing.
Greer lays out clearly that the Trump administration views their actions as returning to more than two centuries of American tradition and policy that made their country the envy of the world. They don’t view the imposition of tariffs as walking away from the traditional position of the United States, they see it as embracing the traditional American position.
Once we understand this, we can take a Canadian position to react, adapt our stance at trade negotiations and hopefully thrive.
I’ll have more to say on what approach I think Canada’s negotiators should take in the coming days, but Ontario Premier Doug Ford’s original position of an Am-Can fortress focused on building up and protecting North American manufacturing would probably have the greatest chance of success.
Perhaps you will agree after listerning to Greer explain what they are doing and why. Drop your thoughts in the comments section below.
Agree with you, Brian.
“19th century and early 20th century, the
U.S. government relied on tariffs (taxes
on imported goods) and excise taxes as its primary revenue source rather than an income tax. From 1790 to 1913, tariffs generated roughly half of all federal revenue, particularly supporting the government before the adoption of the 16th Amendment in 1913.”
Trump is trying to lower income tax on its citizens which is an election promise.
Anyone who says not understanding the motive behind tariffs is shortsighted. 70 percent of our trade is done with the US. Doing trade with China is a recipe for disaster.
Pierre Trudeau said “If you don’t agree with me it is because you don’t understand.” And Liberal/Laurentian elites still operate on this premise. Accordingly, they will never understand the Americans or Western Canada. They will continue to believe in their own superiority and see Canada without a national identity, but only comparably better than the US.