How to respond to Trump’s tariffs
Advice for Canada, Mexico, and perhaps others
President Trump has slapped 25% tariffs on Canada and Mexico, and 10% on China. Why he dislikes the Canadians so much is beyond me. For sure, the US runs a budget deficit with Canada, but the US has bigger deficits with eight other countries - including Vietnam, Germany and South Korea (Jan-Nov 2024 data). And anyhow, a bilateral deficit is completely and utterly meaningless as a measure of anything.
Canada will respond. Chrystia Freeland, the economically literate former FT journalist turned Canadian finance minister turned Prime Ministerial candidate has called for a massive tariff on Teslas, believing that Trump will listen to Elon Musk’s pleas.
He won’t. Trump does not care less about Musk or Tesla. We know that for sure, because Trump has announced the end of subsidies for electric cars in the USA - a move that will hit Tesla more than any other company.
There are no tariffs that Canada can impose that will work - indeed, they risk being counter-productive. After all, if Canadian tariffs reduce US exports to Canada, the trade deficit grows, and Trump becomes even angrier with Canada.
Instead, Canada should…