Key Insights on President Trump's Trade Tactics

Author: Gitane De Silva

It has only been seven weeks since President Trump took office and we have already seen considerable change on a number of fronts, including to the Canada-U.S. relationship and U.S. trade policy. The constant change can make it hard to keep track of where things stand, but here are a few things that we do know:

Uncertainty remains the name of the game

The uncertainty is not caused by an inexperienced leader and his team. Uncertainty is one of President Trump’s negotiating tactics. He likes to keep his opponents off-balance and guessing, leaving them to attempt to satisfy a demand that he has yet to defined. It was a hallmark of his first Administration, as well, so don’t expect a more “traditional” or scripted approach to emerge any time soon.

Tariffs as a strategy

Despite the turmoil caused to stock markets and increasing concerns raised by U.S. manufacturers and farmers (among others), President Trump remains committed to tariffs as a policy tool. Why?

• He believes that the global trading system has been unfair to the U.S. and he wants to reset the table.  
• He sees tariffs as a way to onshore investment and manufacturing, creating jobs and making the U.S. not only more self-sufficient, but dominant in a number of sectors.
• He wants to make the tax cuts from his first Administration permanent, which will cost approximately USD$4.5 trillion. President Trump’s team sees tariffs as a way to generate new revenue (which they wrongly claim will be paid by other countries) and fill this budget hole.  

It was never about drugs, but it is about drugs

President Trump’s focus on the Canadian border and the flow of illegal migrants and fentanyl was a way to invoke the International Emergency Economic Powers Act and impose tariffs on Canada without Congressional approval. According to the U.S. constitution, Congress has authority over trade matters, but President Trump is using Executive Orders to impose tariffs. It unclear as to whether Canada’s actions to stop the flow of illegal drugs across the border will ever enough to put the threat of tariffs to bed, given the President’s commitment to using them.

At the same time, a number of people close to the President - like Commerce Secretary Howard Lutnick and Senior Counsellor for Trade and Manufacturing Peter Navarro - believe that globalization and free trade are the cause of the opioid crisis in the United States. They blame free trade for the loss of manufacturing jobs, creating unemployment and causing people to turn to drugs out of desperation. In other words, even if we can’t do enough to address it, the link between trade and drugs is not going away.  

So what can we do in the face of this uncertainty?

First, remember to breathe. This is a marathon, not a sprint. And like any marathon, we need to remain focussed on our strategic priorities and not be blown off course by the uncertainty along the way.