Why Canada has no good options on car tariffs
Major car manufacturing countries — Canada included — faced a grim reality as officials met in Geneva this week:
U.S. President Donald Trump’s car tariffs (should he follow through and impose them) may be worse than anything they’ve dealt with so far, no matter what they do in response or retaliation.
No one’s sure if the ceasefire brokered by the European Union — no further tariffs while new bilateral trade talks get underway — can hold, or if it even applies to countries outside the EU.
“The stakes are immense,” said Debra Steger, a former Canadian trade negotiator who helped build the World Trade Organization before joining the University of Ottawa’s law faculty.
The economic impact of car tariffs “absolutely dwarfs” the steel and aluminum tariffs already affecting Canada’s economy. “Let’s not fool ourselves,” she said.
South Korea accepted import-restricting quotas from the Trump administration to dodge steel tariffs. Recent modifications to its bilateral trade deal with the U.S. placed quotas on Korean cars, too.
The EU’s now in bilateral talks with the U.S. to avoid car tariffs. The Trump administration may use car tariffs as leverage in Mexico’s NAFTA-related talks with the U.S. this week.
“They all have different levels of skin in the game,” said Kristen Dziczek, vice-president for industry, labour and economics at the Center for Automotive Research.
The localization of production inside NAFTA’s tariff-free zone — prompting, for example, German companies to assemble cars in Mexico, or Japanese companies to invest in Ontario facilities — means Mexico and Canada have the most to lose if they aren’t exempted from the threatened tariffs.
But if things really are turning sour, Mexico has more options than Canada does, thanks to some aggressive trade deal-making around the world. Its foreign investment is growing and its non-NAFTA exports are expanding.
“They can start turning even more aggressively outward. Canada has a shrinking base,” Dziczek said. – CBC Nwes
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You don’t think Trump knows all this? That is why he is doing what he is doing. He knows that the US is in the driver’s seat when it comes to trade negotiations. Every country wants to sell their products in the US. Cut off that market and hundreds of thousands of jobs around the world disappear.
That is a pretty strong bargaining chip when it comes to world trade negotiations.
The fact that Mexico is in better shape that Canada when it come to global trade, says a lot about how our Federal governments have failed Canadian workers.