Canada’s former ambassador to the United States says he’s confident Ottawa can avoid the worst of the tariff threats proposed by US President-elect Donald Trump, but Canada won’t be completely unscathed.
Frank McKenna, now a vice chairman at TD Securities, said he believes the next president is looking to use money from tariffs to cut U.S. taxes, but Trump’s 25 percent tariff is likely a “soft number” intended to serve as a bargaining tactic. . Before his inauguration.
“If he were to actually put 25 per cent tariffs on all Canadian goods and all Mexican goods, that would be enough to accelerate inflation in the United States of America and possibly cause a rise in the dollar, which would undermine what he is trying to do.” “McKenna told Global News.
He added: “There is a possibility that we will end up with 10% tariffs in the short term until we can resolve the matter, but no, I do not think we will end up with 25% tariffs in January.” 20.”
If Trump carries out his threat, federal officials as well as premiers and trade groups said it would wreak havoc in Canada and the United States with more than $3.5 billion in goods and services crossing the border daily.
“It is impossible to raise tariffs to any meaningful degree without hurting both American and Canadian companies,” said Greg Hosesian, a partner at Foley & Lardner who heads the law firm’s international trade and national security practice in Washington.
In order to avoid the worst-case scenario, McKenna says Canada needs to implement public diplomacy and private negotiations, which are already underway.
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Despite Trump’s criticism of Prime Minister Justin Trudeau, whom he described as a “governor” of the “great state of Canada,” McKenna believes there is hope for an agreement.
“Contrary to what some might think, Trudeau and Trump actually have a good personal relationship,” he said.
McKenna, a former premier of New Brunswick, also urged Canadian officials to avoid repeating Trump’s narratives.
He added: “I would not like to see (the two prime ministers) inflating American allegations at the border, for example, regarding suspected drugs, immigration, etc. “It wouldn’t be helpful if Canadians ended up supporting those arguments from Trump,” he said.
One claim Trump makes frequently is that the United States is “propping up” the Canadian economy. But as several trade experts explained to Global News, the reality is that America has a trade deficit with Canada.
“(Trump) views trade surpluses and deficits like profits and losses,” Hosesian said. “Which ignores the fact that, yes, we give you money, but you give us the goods.”
“I don’t have a trade deficit with Walmart because I give that money, because they return the merchandise to me,” he added. “That doesn’t mean I’m supporting Walmart.”
If negotiations are not productive, McKenna said, Canada will have to respond with retaliatory tariffs. But he remains hopeful that the United States will abide by the law laid out in the United States-Mexico-Canada Agreement, which Trump himself negotiated during his previous presidential term.
“We’ve signed, made and delivered agreements under NAFTA, now called CUSMA, saying we’re not allowed to do any of those things, so we’re on the right side of the law on this,” McKenna said. “The United States will be violating the law if (the tariffs) go ahead.”
While Hosesian agrees that a 25% tariff would be a “blatant violation” of the agreement, that likely won’t be enough to deter Trump.
“Unlike most situations where you look at it and say: What do the rules allow the government to do here?” You have to look and say, “Well, what can a president do if he doesn’t care so much about the rules?”
“I think that’s partly what’s driving us into this,” he added. “He’s salivating over the fact that [CUSMA] “The review will give him more leverage to move Canada forward.”
The first joint review of the CUSMA trade agreement, which Americans refer to as the USMCA, is scheduled for July 1, 2026, which could make any tariff violations under the current agreement invalid by the time it makes its way through the courts.
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