MNI INTERVIEW: Canada Must Avoid US Trade War- Factory Group
MNI (OTTAWA) - Canada must avoid a broad trade war with the United States because the resulting frictions would be too damaging for its industrial base, Canadian Manufacturers & Exporters President Dennis Darby told MNI Friday.
“It will completely undermine the profitability and probably the viability of a lot of industries,” Darby said. His group represents more than 2,500 firms and often consults with government officials. (See: MNI INTERVIEW: Trump Tariffs Will Decimate Canadian Loggers)
Beyond the bargaining rhetoric, Darby said Canada's economic position is more tenuous. The country sends three-quarters of its exports to the U.S. “The U.S. is much more important to Canada than Canada is to the U.S. in absolute dollars, as a proportion of our economy. So we have to very careful, we don’t think anybody wants an all-out trade war,” Darby said. (See: MNI INTERVIEW: BOC To Slash Rates If Trump Forces Tariffs)
Foreign Affairs Minister Melanie Joly told reporters Friday she's briefing cabinet on retaliatory tariffs and “we need to make sure also that we stand up for Canadians.” That echoed what officials said before imposing dollar-for-dollar tariffs during Trump's first term in response to penalties against aluminum and steel.
Responding to incoming U.S. President Donald Trump's threat of a 25% tariff on all products is dangerous and “Canada can’t afford a broad-based retaliation” Darby said. His group's polling from December, after Trump brought up tariffs, again showed just 11% of members could handle that kind of measure while noting Americans would feel the pinch from higher prices on auto parts, food, fertilizer, aerospace and machinery.
'VERY DIFFICULT PERIOD'
“We just don’t have the margin in this industry to be able to take that, so it’s going to be inflationary to the Americans,” Darby said. His career includes working for six years in Cincinnati and for Procter & Gamble. “We sell them the ingredients and the parts, so we’re part of the cost of production for them, that’s where they’ll see it.”
American concerns about dumping goods is overblown when it comes to Canada because a large share of its U.S. exports are commodities like energy priced in global markets in U.S. dollars, Darby said. Canada's appeals to Trump are less coordinated than last time, with PM Justin Trudeau saying Monday he's quitting in March. “Right now, regrettably, we’re in a period where political leadership isn’t as clear,” Darby said. (See: MNI INTERVIEW: Trudeau Cabinet Disarray Fuels Trump Trade Risk)
Canadian executives are already going through another round of holding back investment that's been weak over much of the last decade, Darby said. “They’re not hiring or they are thinking about laying off, or they aren’t investing and not upgrading their systems because everyone’s kind of waiting to see where this goes,” he said. "We’re in for a very difficult period."