What does China have to do with Trump’s Tariffs?

Trumps tariffs on Canada are going into effect. It’s a big topic that’s been on everyone’s minds and for good reasons too. About two thirds of Canada’s GDP is due to trade, and a large chunk of it is of course trade with our next door neighbour, USA. To many Canadians, this seems like a stab in the back and betrayal from it’s long-lasting ally and trading partner, and many Canadians are angry at Trump due to the fear and anxiety about how the tariffs will affect the Canadian economy. Many Canadians still bitterly remember the last time Trump was in office. His tariffs on Canadian imports had a profound negative impact on the Canadian economy, and the tariffs were not as severe then.

Many are left puzzled wondering just what Trump is doing. After all, he keeps talking about how he is a good businessman and how he is going to be making good deals. But alienating your closest ally doesn’t sound like it’s good business! Not only that but Canada is likely to implement it’s own tariffs on American imports, and while it’s not as critical for them, trade with Canada is still a significant portion of American economy, and Canada is USA’s biggest trading partner. So what gives?

To understand Trump’s behaviour and rationale is not so difficult. Trump’s style of doing business is well documented in his own book – The Art of The Deal. In it, Trump says he favours a particular negotiation tactic. He starts negotiations with very bold, aggressive and downright ridiculous demands, which leave the other side emotionally off-balance. And from there, he negotiated back down to what he originally wanted from the deal. So it’s entirely possible, and plausible that the 25% tariff is nothing more than Trump trying to scare Canada into “playing ball” and agreeing to his other demands and wants in exchange for much smaller tariffs. So what does Trump actually want?

Many would be wise to remember just how much President Trump spent talking about China. He is obviously concerned that China is surpassing USA as the global leader in pretty much every sector. China is very obviously going to use their power in a way that hurts USA – both big players and the small people. For example, fentanyl, a powerful drug that’s causing a lot of trouble in USA right now, is largely traced to being produced in China before being shipped overseas to USA. China is well known for its hard stance on drugs, regularly executing drug producers and drug dealers, so many speculate that even if the Chinese government is not directly responsible for selling drugs in USA, they are turning a blind eye to something that they see weakening their rival. Not only that, but Taiwan has been a big point of contention between China and USA. Taiwan despite being a small island nation is the world’s biggest producer of semiconductors – a component critical to the functioning of every modern electronic device. Control over semiconductor production is a matter of national security. It’s obvious that China would want to establish dominance over what they feel is a historical Chinese territory, as well as the political and economic control it would bring. Taiwan in turn, being a small island nation, is forced to agree to most US demands to guarantee US military aid – the only thing that is keeping China from using force to seize the island. Tensions are high over this small island, as even a visit from Senate Speaker Nancy Pelosi last year had both parties angry and announcing veiled threats to one another.

So what does this all have to do with Canada? Very simple. For a very long time, Canada has been politically and economically drifting under Chinese influence. Even during Prime Minister Stephen Harper’s tenure ten years ago, it was already a common concern about how much influence China has economically and politically in Canada. And it has only grown since then. In 2018, Chinese People’s Liberation Army staged military exercises on Canadian soil and Canada frequently joins Chinese military exercises at sea, all in accordance to treaties still signed by then PM Stephen Harper in 2013. Similar things are happening in Mexico. Two years ago, representatives from PLA joined the Mexican army in military celebrations and parades, which seems strange given the distance and lack of interaction between the two nations. Furthermore, President Trump has previously expressed concerns about the amount of Chinese nationals who illegally cross the border between US and Mexico, and suspects that possibly something more sinister is brewing.

Obviously, in the grand scheme of things Trump would demand that Canada choose who its friend is – and make us choose between US and China. Another thing that he has already accomplished is the resignation of PM Trudeau and his Liberal party, as they have been vocally opposed to Trump’s presidency on ideological grounds the last time. It’s widely speculated that Chrystia Freeland’s resignation was due to the announced tariffs. Since they are expected to do so much damage to the Canadian economy, any suave politician would go to great lengths to avoid being associated with that! So most likely the Liberal leadership is hoping to sidestep this coming troublesome times and let someone else take the blame. It’s worth noting that US tariffs are only 10% on Canadian oil. This is both a smart decision as Canada is a major source of oil for USA, but also something that drives the wedge between Alberta and the rest of Canada. Alberta has recently seen strong separatist sentiment rising under Liberal governship, and they are the most likely to respond favourably to Trump’s demands.

In the meantime, we can expect to see prices to keep rising across Canada. Some would say that prices have already been steadily rising in the past, but the 25% tariffs will be passed down to consumers. As well, many businesses and industries that rely on importing or exporting from USA (which is most of them) are likely to struggle or go under. We can expect the Canadian dollar to continue to weaken. Us personally, we have recently reduced our pricing on our coroplast signs, but considering that coroplast is imported from USA, we will most likely be raising our prices in the near future, so if you were considering running an advertisement campaign, sooner is better than later!

All in all, the tariffs are likely to be a big problem for Canadian. However, we can be reasonably optimistic that it’s likely that it’s not Trump’s intention to have them up for long. While many resent such aggressive negotiation tactics and would call it bullying, a strong emotional backlash is ultimately what he is probably relying on, in order to “reign in” his “wayward ally”.  Ultimately, if we are to avoid being at the mercy of people like Trump in the future, it’s important that we have a strong government that’s not afraid to challenge big global players, and is willing to fight for the interests of the Canadian people.