If a lawyer with a laptop and an ability to formulate basic google searches can do this, so can the damned Whitehouse.
Lets take a look at some aspects of the US – Canada trading relationship. We’ll start with local considerations (Michigan) and then cover automotive, agriculture, energy, minerals and finally some more strategic considerations. Spoiler: USA loses by an innings.
Michigan, Wisconsin etc.
Michigan alone exported 23BN USD to Canada in goods and serices. If Canada imposes targeted tarifs on goods coming from US manufacturing hubs, this will be exacerbated. Canada did this in 2018 (Bourbon and Motorcycles – can Harley Davidson allow the indian and british marques to gain more traction on the US Continent?)
Automotive
Auto parts cross the border multiple time in integrated supply chains. The average vehicle contains 30.000 parts EACH of which will have crossed the Canada – USA – Mexico border eight times before the final vehicle is shipped. Now if each of those parts is potentially subject to tariffs at the US border, the price of a new vehicle in the USA will skyrocket. Given that the average depth of the supply chain for each part is 10 – 20 levels, that’s an awful lot of US component suppliers who are about to lose alot of business.Furthermore – Tariffs will need to be checked, leading to friction in the supply chains at the border (see what is going on currently in the UK as a result of that nonesense, BREXIT), destroying modern JIT techniques. The result will be that manufacturers will relocate to eliminate these frictions. So, US communities which are already struggling will lose more manufacturing base.
Finally, Canada imports 24Bn USD in finished autos, currently. Not much longer. Can the US auto industry stand to lose 24B in exports while pricing itself out of its own domestic market?
Agriculture
Whereas Canada exported USD 40.5B of produce to the USA in 2023, the USA exported USD 32B to Canada in the same year. Agricultural exports to Canada are made up mostly of Corn, Soyabeans and Orange Juice. For now. If Canada imposes tariffs on these goods, then canadian consumers will buy less, this will lead to a domestic surplus in the US driving prices down. Good for America hey? Well, given the operating margins of American farmers, not so much. Once those individual trading ties accross the border are broken, they will take years to rebuild, should equilibrium (i.e #47 kicked out of office and a sane economic policy regained) return. A business man knows how hard it is to regain lost custom and what the frictions are. I would recall what happened to US Soyabean producers in the last round of this game.
The Canadians are going find it much easier to find new markets for their produce than the US is, mostly because the US will be embroiled in tariff disputes with the whole of the rest of the world, whereas Canada, simply put, wont be. Oh and there is already an EU-Canada trade deal in place.
Energy
Energy Exports to the US: 2023 Canada exported USD 100B of Gas and Petroleum to the USA. (I heard the Europeans have this unexpected shortfall in Gas deliveries since the recent unpleasantness on the borders).
Now the refineries and power plants in the north of the USA rely heavily on these deliveries. If for any reason these were to dry up, then the dislocations would drive energy prices up in the USA but Canada would still be able to sell its product. I call that bargaining power.
Minerals
In 2023 Mineral exports to the US were USD 83.8B for a net surplus of 31.5B (up 16% on 2022. Canada exports Nickel Cobalt and (oh yeah, that!) Lithium in large quanities to the USA. It is a moot point whether or not the Lithium operations in North Carolina and Tennesse (Piedmont Lithium being Tesla’s main supplier through 2025) can take up the slack quickly enough if the Canadian imports dry up. Canada is already looking at strategic partnerships for Lithium deliveries to the EU and South Korea.
Now, if America loses the EV war to china for lack of resource, or any other reason, it loses the 21st century for good. With reduced economic power comes inevitable power loss (ask a British historian if you dont believe it – US world power was only achieved as a result of FDRs reforms AND American manufacturing growth in the 1940s, thats roughly 85 years. The british empire lasted alot longer but declined just as rapidly through loss of manufacturing dominance. The USA is already losing tomorrow’s manufacturing markets to China, it cannot afford to lose Canadian raw materials. (But then again,maybe they can begin exporting raw copper to the middle east once more and finally make America great again!)
Strategic: USMCA and Trading Patterns.
If Canada concludes that the USMCA is no longer worth the paper it is written on, and loses faith in the ability of the alliance to balance trade tensions on the continent, then it will seek new trading alliances (the EU will be waiting quietly) and be even more likely to pursue legal remedies (it already has an appeal to the WTO in the system), which will further unsettle businesses needing to make decisions. Other players will be watching closely to see what Canada does and learn what works, then adopt the same stance in their tariff battles with the administration, creating new natural trading alliances which circumvent the US altogether. Once these new natural alliances crystalise they will be formalised and a new trade pattern will emerge, further reducing US Power. Once that happens, it is only a matter of time before the US loses its position as the reserve currency of choice. AND that is game over, as the debt will then no longer be carried by sovereign and quasi sovereign entities needing to hold USD assets.
Whats the TLDR?
It looks like 47 is either bluffing, and is going to get his bluff called, or he and his advisors are too stupid or too invested in MAGA rhetoric to see that if they play this hand, their base(s) (both the billionaire bros and the blue collar) loses. The real question the bases should be asking is, does he give a f***?
