Criticism of Trudeau
Pierre Poilievre, Canada's opposition leader, previously said he would oppose Trump's tariffs and has supported more security along the US-Canada border, one that Trump has derided as "open" and "ridiculous". Yet he downplayed concerns that Trump's proposed mass deportations would send migrants into Canada.
Poilievre said he would negotiate ending tariffs on softwood lumber and secure exemptions from the Buy American Act, adding that Canada had suffered from declining investments as capital shifts to the US. "I want our money back," he said.
The Trudeau government said Trump's first term, marked by mutual tariffs on steel and aluminium, proved that Canada should be exempt from such measures, but was criticised for not securing tariff exemptions in CUSMA, including on softwood lumber.
Canada and Mexico say Trump's tariffs would harm everyone, increase inflation, and damage jobs. As America's top external supplier of crude oil, Canadian energy exports to the US topped $122bn last year. A 25% tariff on this would increase US energy costs, said Wilbur Ross, Trump's first Secretary of Commerce, and would not add US jobs.
Flavio Volpe, President of the Canadian Automotive Parts Manufacturers' Association, gave further warnings, saying that the Canadian and American automotive industries are deeply intertwined and operate on very narrow profit margins.
"The President-elect has done what he's famous for, which is trying to stir the debate. The only surprise is how early he's done it," said Volpe. "What we learned in the first term was that he uses strong rhetoric, public rhetoric, but the negotiations are always tough but reasonable. I'm just telling everybody to be patient."
At the end of November, outgoing President Joe Biden added his voice, criticising Trump's plans for a 25% tariff on imports from Canada and Mexico as "counterproductive". Speaking to reporters, he added: "I hope he reconsiders. The last thing we should do is start ruining these relationships."
Mexico and Europe
Trudeau has not been the only one to reach out to Trump. Mexico's relatively new President Claudia Sheinbaum spoke to Trump on the phone last Wednesday, after which Trump said she had "agreed to halt migration through Mexico and into the US, effectively closing our southern border".
Migrants from Venezuela crawl through a hole in the razor wire to cross into Eagle Pass, Texas on September 25, 2023.
Sheinbaum later said tariffs were not explicitly discussed, the two instead agreeing to work toward "good relations". She also refrained from confirming any specific commitment to halt migrant flows, as Trump claimed, but expressed confidence in avoiding a trade war with the US without elaborating on how this might be achieved.
She highlighted her government's efforts to combat the consumption of fentanyl, a synthetic drug responsible for thousands of American deaths annually, and said Mexico was managing migrant caravans within its borders, without pledging to stop their flow.
To others' detriment
In the past, Trump's approach has worked, with Christine Lagarde, president of the European Central Bank, famously urging Europe to "buy certain things from the United States," such as liquefied natural gas, defence equipment, and agricultural products, to avoid Trump's trade wars.
Lagarde was candid in warning that a Trump second term would be a "clear threat" to Europe, but Trump is unlikely to change tack: his team sees trade as a tool to enhance American market dominance in a world where trade "partners" are far from equal. The aim is also to draw economic activity away from other states and thus weaken them.
This transactional approach aligns with economist Albert Hirschman's theory in National Power and the Structure of Foreign Trade (1945), which states that "increasing wealth through foreign trade enhances power relative to other nations".
Analysts and markets are waiting to see if Trump follows through, and if so, how Canada responds, specifically whether is feels forced to adapt to Trump's transactional approach or to confront it. A lot depends on the answer.
