Carney may be paying them to do what they are doing here.
Carney’s better off without a big Trump trade deal. Just ask the Europeans
(I almost overlooked this article. I wouldn't want to miss a payment from Carney)
Prime Minister Mark Carney’s failure to reach a comprehensive tariff-reduction deal with U.S. President Donald Trump, as the likes of Britain, the European Union and South Korea have already managed to do, is seen by some as a failure on the PM’s part, or at least a great disappointment in the face of humiliating public meetings in the Oval Office. Mr. Carney may even see it that way himself.
Listen to officials and experts from those places, however, and you’ll hear an overwhelming chorus of buyer’s remorse, as well as a growing realization that those hastily assembled deals are unlikely to remain intact for long. In fact, Mr. Carney’s lack of a major deal might better be seen as a shrewd strategic move – or at least a stroke of luck.
The latest quarterly joint economic forecast by Germany’s five major economic institutes concludes that the EU deal, which involves a pledge to invest more than €600-billion in the U.S. in exchange for most tariffs being reduced to a still-punishing 15 per cent, don’t offset its burden. Pascal Boniface, head of the French Institute for International and Strategic Affairs, recently called it “a particularly unbalanced trade accord,” because there are no tariffs on U.S. goods entering the EU, which he called a “submission” and a strategic mistake.
The U.S. deal with Britain, which left the country with 10-per-cent baseline tariffs, has been similarly savaged. A parliamentary inquiry concluded that “it is now clear that the UK has secured less favourable terms for some sectors than those negotiated by the EU,” and that some of the largest industries had to give up almost all trade in order to obtain only slight improvements for others.
Both deals also appear to offer no security from new tariffs. Mr. Trump’s threatened tariffs around pharmaceuticals, trucks and movies would supersede and replace anything contained in the deals.
But Mr. Carney has an even larger reason to avoid reaching a big, beautiful deal in 2025: Starting on Nov. 5, the U.S. Supreme Court will be ruling on the constitutionality and legality of all of Mr. Trump’s tariffs, whose unilateral, executive-driven imposition he has justified under the 1977 Emergency Economic Powers Act. Of course, the economic conditions facing the United States when he took office, by several measures the strongest the country has experienced in many decades, can hardly be classified as an emergency.
If the court declares the tariffs illegal, the deals will immediately become worthless and Mr. Trump is likely to impose new tariffs based on some other justification of questionable legality. If it rules the tariffs are legal, however, it could be equally bad – as Financial Times writer Gillian Tett observed, “Trump’s powers will then dramatically expand, enabling him to impose taxes or capital controls in a unilateral, almost monarchical manner,” which he will almost certainly do, superseding any deals.
Of course, these deals are not only, or even mainly, about trade. European officials argue privately that the EU tariff deal was mainly made quickly in order to keep Mr. Trump on board with the U.S.’s security commitments, including the provision of weapons to Ukraine (though European countries now have to pay for many of the American weapons sent there) and participation in NATO – both of which appear to have succeeded. By this logic, the economic cost of the deal was a small price to pay.
Mr. Carney certainly has similar motivations, and Canada’s negotiations are part of a shared strategy among Western governments to keep the Trump administration engaged in security measures. There are reasons why Canada’s proposal is portrayed as a joint trade and security deal.
But Canada is in a very different position from Europe and Britain. Though it would be painful, they can afford to lose the United States. With the exception of a few industries, most U.S. trade could be replaced with other markets on the continent and beyond.
Canada has no such luxury. In his recent investigation into Canada’s prospects for diversifying from the U.S. into Europe, my colleague Ethan Lou reached a sobering conclusion: At best, with decades of effort and investment, we might manage to reduce our dependency on U.S. markets only slightly. “If 20 years down the road, we turn that 10 per cent of exports to the continent to 15 or even 20 per cent,” he writes, “that would be as much success as we can ever hope for.”
This explains why Mr. Carney endures repeated humiliations in the Oval Office, nodding along to outrages uttered by an unhinged head of state, but avoids reaching a quickie deal: We have no choice but to remain at the table, even if it’s better to avoid any big commitments until United States-Mexico-Canada Agreement renegotiations begin.
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