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Canada’s Best Bet to Win Trade War: Ignore Trump, Take Case Directly to States

Posted March 03, 2017

Under Economic Issues, International Trade Issues


(Jason Martin via CNBC)

Trade rules between Canada and the United States are about to change, big-league. Minimizing damage to Canada will be the Canadian government’s biggest challenge. Under normal circumstances, you’d expect some give-and-take negotiations, with net positives for both the United States and Canada. But we are not dealing with a traditional Washington.

There are two sources of upheaval; both come from the GOP. The first is congressional Republicans’ “A Better Way” plan, which includes a 20 percent border tax on imports and tax exemption of U.S. exports. The second is President Donald J. Trump’s interest in “tweaking” Canada-U.S. trade. [...]

The biggest change in the congressional Better Way blueprint is the addition of a consumption tax. All well and good, except it excludes taxation of exports, which is great for an inward-looking “America First” supporters but poor for trade partners like Canada.

The border tax idea would effectively end NAFTA and its predecessor, the underlying Free Trade Agreement. Economists predict the Canadian economy could lose at least 1.5 percent of GDP because of such new trade barriers. Canada would be forced to retaliate. Click here to read more.