The Q&A: "You're not going to win that argument"
Our man in Ithaca says Canada's going to have a hard time convincing the Trump White House that it needs tariff-free Canadian goods
It felt like a good time to put Donald Trump’s tariff policy in a broader context. I couldn’t think of anyone better to do that work than a leading Canadian in the United States: Peter Loewen, the Harold Tanner Dean of the College of Arts and Sciences at Cornell University in Ithaca, New York.
Loewen’s an old friend. He decided I should have a podcast before I did — three years ago, when he was Director of the Munk School of Global Affairs and Public Policy at the University of Toronto, and I was just a magazine writer with a gift for storming out of lousy workplaces. He’s a clear-eyed and iconoclastic observer of events on both sides of the border. His message to Canadians in ominous: the Americans probably can get along without our raw resources and finished goods.
We spoke at noon, between Mexico’s one-month reprieve from tariffs and Canada’s. I’ve lightly edited Loewen’s comments for brevity and clarity.
PW: I feel like I need to time-stamp all of these conversations. We're now in the moment when Trump has said that the Mexican tariffs won't go ahead immediately, but the Canadian tariffs will. Do you have any sense of why they would draw that distinction?
Loewen: I think there are two possible explanations that are reasonable. One is the personal politics explanation — that, for whatever reason, Trump feels differently about the president of Mexico, and the government of Mexico, than he does about the Prime Minister of Canada and the Government of Canada. But I think you can think about that in terms of the principals.
The other explanation is that, in fact, tariffs will be more costly for Mexican imports than they will be for Canadian imports. They could be more costly in terms of just how consumers experience them — for example, how quickly they will experience them. Or how costly the political signals are that Trump is receiving from people in his orbit, who've got economic reasons to not like imports on tariffs.
I think a lot of Canadians have been [hoping] that tariffs will increase costs for consumers, and that will lead to a negative signal that will get through to the White House, and then we'll persuade them to take the costs off of tariffs. And that's probably true. But the thing that we haven't hung our hats on for good reason, is that tariffs will also actually make some American industries more competitive.
If you think about the debate over softwood lumber over all these years, American timber producers argue that Canadians can produce timber at a lower rate because of a subsidy, via Crown land. That they get logging rights and it becomes cheaper for them. It's an unfair subsidy. If you increase tariffs on softwood lumber coming over the border, it clearly advantages those producers of timber in the United States who are using a different model in their industry. They are going to send a positive signal to the President that they like the way things are now.
So some people will benefit in the United States from tariffs. And they may be telling the President, Keep it up.
PW: I've seen suggestions that lumber from the Southern states has now displaced Canadian lumber as the main source for the US construction industry. And that's partly a result of the sort of constant harassment campaign that each side has been running against the other for decades. Canadian lumber has become too much of a hassle.
Loewen: This is a serious warning for Canadians. This notion that we have indispensability on some industries might be true in the short term. But I think you've got to put this in the larger context of the last 20 years in the United States. Americans, at some level, are convinced that they can spin up a domestic industry in anything they want to. And they don't need the benefits of trade with two relatively large trading partners to make that happen.
You can say, Well, half of the refineries are set up for Canadian oil, so they can't do without it. But you'll be saying it to a country which created a shale gas industry — not overnight, but pretty quickly. And if you want to put up the political economy of our energy industry — where it's extremely hard to get pipelines built, and where the government’s taking a bath on the one that it did build — against an economy which effectively built up a whole new supply of oil. And they haven't even opened anything up in Alaska. You're not going to win that argument against them.