Retaliatory tariffs on U.S. imports offer some hope, create some fears for Canadian businesses – June 3, 2018

A very well written article that can be found by going to the Globe and mail by clicking the link below:
https://www.theglobeandmail.com/business/article-retalitary-tariffs-on-us-imports-offer-some-hope-create-some-fears/ It’s very well written and gives a perspective of what’s to be expected from the U.S, Canada trade war.

Now, from my perspective, Canada has more to lose than America does the longer this trade war lasts. The interesting player in this trade war is China. What makes China interesting in all of this is China has the ability to raise the cost of living in the United States. As a capitalist, myself what I have to point out are the flaws in capitalism the moment you add unions and employee entitlements into the mix. The moment socialism enters into the capitalist arena you create a different type of business animal, you get business animals that have a fiduciary duty to look out for their shareholders best interests.

How this translates into a domestic monopolized economic environment is that it forces corporations to raise prices just enough to keep foreign competitors from competing in their domestic market. On a political scale, this is the hope for Canada to win this trade war. Because as domestic prices rise the real question will be, can American consumers handle the inflation? If the answer to this question is yes, then it becomes a waiting game, the waiting game being, will Canada drop its current tariffs on U.S made goods?

I know as Canadians many of us feel entitled to charge Americans tariffs, we feel entitled to keep American companies out of Canada, we feel entitled to protect industries we deem fit for protection, but these protections come at a cost. These protections give us a false sense of security and these protections in times like these really work against us. Because what Trudeau forgot is that he’s running a deficit, he forgets that right now American federal reserve continues to raise interest rates, Trudeau forgets that if the BoC decides to raise rates he’s screwed, if the BoC decides to hold rates steady he’s screwed if the BoC decides to lower interest rates he’s screwed.

The reason why all road lead to Trudeau getting screwed is that if the loonie lowers it will be good for business but bad for people on fixed incomes because their Canadian dollars will buy less, if the Bank of Canada raises rates Trudeau has to remember that Canadians are in massive amounts of debts, there’s an overvalued housing market and prices on goods might rise anyway, because of uncertainty.

This is the problem with intentionally running a deficit, this is the problem with deficit spending and growing the government unnecessarily. In my view, there’s only one period of time that Canada should grow the government and that’s in a time of war. In times of war, it’s completely understandable in my opinion why a bigger government might be necessary when a country is at war. But other than that Government shouldn’t be meddling too much in the private sector because America (Our largest trading partner) has a history of hiring these Ronald Reagan type of Presidents every 20 years or so.

Personally I think Trudeau should have done NOTHING, if at any time this would have been the right time for Trudeau to play the victim card, if anything what Trudeau, should have done, it should have continued to do what he’s been good at which is apologising, he should have apologised to America and deflected the blame of Canada’s the tariffs on American made goods on the previous Canadian Conservative government.

He should have removed all tariffs and then allowed Trump to unravel on his own because what Trump would have done next is attacked the Bank of Canada for artificially lowering its currency. As that would be the only argument Trump would have had against Canada. When Trump made the accusation Trudeau could then ask that Trump tell the federal reserve to stop doing the same thing.

This is where they could have achieved equal ground and, this would also be an advantage for the Canadian economy as Trump’s tariffs would then be unjustifiable. Therefore, if the basis of Trump’s tariffs stemmed from the Bank of Canada, Canada could make the same argument against the American federal reserve. Now, everything I’m proposing here wouldn’t have to be permanent, it could be temporary, Trump will only be in office for 8 years and if the American tariffs continued and nothing was being done Canada could then impose its own tariffs matching America’s. My point in all of this is Trudeau reacted way too soon. Trudeau’s reaction to Trump’s tariffs isn’t going to win him any votes however it has the potential to make him look very un-leader like, once Canadian businesses start feeling the pinch.

As a Canadian, I have to remind the readers that we have been in violation of NAFTA which is the North American FREE trade agreement for years now. If you don’t understand what I’m talking about, right now it’s June 3, 2018, if you go to Amazon.com and purchase something from America what you’ll notice is that built into Amazon’s prices are customs fees. Yes, Canada we’ve been violating NAFTA so long that Amazon has brokered a deal with Canada customs on what your expected Canada customs charge will be. Now think about that for a moment and then you’ll understand Trump’s position.

If you’re reading this and think I’m being anti-Canadian you’re 100% wrong, what I’m writing about here is reminding Canadians of the ebb-and-flow of Keynesian economics. In Switzerland, their government operates almost like a business reacting to the ever-changing market conditions. In Canada, the mere fact that Justin Trudeau is our Prime minister is an indication to me that Canadians don’t put enough emphasis on economics. Yes, economics is a boring topic but as a leader of one of the top G7 nations, you have to know that as Canadians we are not warmongering people, so your main job as a Canadian politician is to understand economics, understand your economy because if you don’t and you’re face to face with a Ronald Reagan type figure you’ll have no idea how to deal with him.

For Canada’s sake, I hope everything works out well. Do Canadian’s really welcome tariffs? My answer is yes, but can they handle a long-term trade war, based on what I know about the Canadian economy, my answer is no!

Interesting times ahead.