No discussion of the Canadian-US relationship is complete without noting the vast differences in how governments manage trade and their economies, especially Canada's heavy protectionism and "supply management" program. While poorly articulated, Trump's tariffs are designed to overcome all non-tariff barriers to trade through Canada's cartel-like systems to establish prices, control production, and keep tariffs high on foreign products. Canada's management of their economy would violate all manner of US anti-trust law.
This is where I fall down on the job - economics. But for Trump, resting his articulation of Canada policy on Mexico style immigration and fentanyl accusations, is just lazy. Yes, he has mentioned non tariff barriers, but hasn’t laid them out in the straightforward way you just did. Thank you!
When Trump started in with calling Trudeau "Governor Trudeau" I thought he had in mind to stick it to the American liberals who long for a wimpy president like that. (The Rolling Stone even once had an article to that effect some time early in Trump's first term). Trudeau is, in fact, the wet dream of many readers of The New York Times and The New Yorker. Beyond that I can't imagine he would really want to bring those losers into the American union--with the possible exception of the province of Alberta, rich in natural resources and home to a population that would vote GOP if part of our country. A larger US-Canadian Union would, as you point out, given the Dems the perpetual majority they are always trying to devise (lately, by importing 11 million new voters from strange places). By the way, Canadians of my acquaintance all have special health insurance policies so that if they need care faster than the 12 or 18 month wait in their own country they can cross the border and see a doctor or a specialist immediately.
The hypocrisy of it all is the stunning thing, right? In Australia, the UK, Canada, and everywhere else there’s national health, the wealthy have their work around to subsidize their luxury beliefs while the poor make do with suicide on demand.
With the permission of a subscriber, jamesmadison951902, I append the note he sent to me. And because, as every AEI economist will tell you, I am not economist, I asked my own colleague and our director of economic studies, Michael Strain for a serious response.
The comment: Admitting one does not understand economics very well is no sin. Tariffs raise the cost of goods for the imposing country and damage the exporting country — then as the tariff imposing country experiences inflation and the central bank tightens rates, raising the value of its currency. Presto, the imposer’s currency strengthens, and the price of imported goods declines. Oooops. Most studies confirm this. So why would Orange Man Bad (OMB) do this. Take him seriously, not literally. This is a negotiating tool to remove any tariffs that either Mexico or Canada have and get to a true free trade deal because the OMB believes America can win competing, but, … he also uses non-tariffs to make that happen. “Gosh GM, nice plant in Saltillo and Oshawa you got there, be a shame if something happened to them”. Next thing you know, GM changes sources. Honda announces it will build it next plant in USA, not Mexico. So OMB calls this a win-win. Cars cost more. But Scott Bessent noted Americans do not equate quality of life with cheap goods. MAGA’s want decent paying jobs that can support families,build communities and strengthen unity — black or white, men or women, and dress up women, … no matter. A good life is a good family, neighbor, faith, community, friends, … and not a government handing out stuff pained ultimately by workers to make people feel better. MAGA is easy — less Walmart, more the person next store is doing OK, has a boat, takes the kids fishing. Democrat, elites, experts, progressives, prog frogs, and socialists are oblivious to this.
This is a good question. Most of the defenses of President Trump’s tariffs policy are wrong on their face, but this is one of the best (i.e., most coherent and internally consistent) defenses.
But it’s wrong for a few reasons:
* It assumes that car manufacturers have way, way more flexibility than they actually do. So the defense is unrealistic to the point of naive. It takes years to build a car factory. In the absolute best case scenarios, it would take many years to deintegrate the production of cars across Mexico, Canada, and the U.S. and to return all the activity that currently happens in Mexico and Canada to the U.S. More realistically, it would essentially be impossible (i.e., it would take decades, not merely many years). https://www.bloomberg.com/news/articles/2025-03-06/automakers-need-years-to-move-factories-despite-tariff-relief
* A subtle but crucial point on which it is wrong is that it assumes that trade policy can have a large effect on the trade deficit. It does not. Now, the odds of trade policy reducing a bilateral trade deficit are much better than the odds of trade policy reducing the overall trade deficit. But the 2018-2019 China trade war did not meaningfully reduce economic ties between the U.S. and China, and the same could occur with a North American trade war. https://www.economicstrategygroup.org/wp-content/uploads/2024/10/Strain-AESG-2024.pdf
* It is politically unrealistic to the point of naive. Secretary Bessent’s comment about cheap goods is ludicrous. What he said is equivalent to saying that it is not important for the purchasing power of wages and household income to increase over time. Good luck convincing the American people of that, Mr. Secretary.
* In a literal sense, if the United States diverted workers and capital away from their current uses and towards the types of manufacturing that take place in Canada and Mexico, then American workers would earn lower wages and American households would have lower incomes. It would be an act of economic self sabatoge with no upside. There would be no winners, only losers.
All that said, if what President Trump is doing is an attempt to get the U.S. a more favorable outcome during the upcoming mandatory USMCA negotiations, then that is at least a coherent rationale. I just don’t think that’s what all this is about.
Well, thank you Ms. Pletka. Mike knows his stuff. I can read and listen to your stuff much better from my device than with my dollars. People free to make their own choices is the best economics. I cannot bring myself to trust that Trump is trying to equalize tariffs. Low tariffs in the United States enriches us. He is playing a dangerous game.
Why do you suppose that we, the west, stood together against communism and the Soviets and we don't against the threat from radical Islamism?
Ms. Pletka, another interesting comment/interview by you with a colleague (Canadian no less!!!).
And again I borrow from Salena Zito, “Don’t take Trump literally, take him seriously.”
Those of us who live in America (as opposed to those who live in the Ameridemia (the academy), know what is going on. We played football, have been concussed, have broken bones, know where meat comes from (not plastic wrap containers), and have held a shovel —and not for gardening, understand what is going on. If I tell you I want you to stop doing something and you keep doing it, then I call you a name (who in America likes to ridicule his opponents with names?). I tell you your mother wears combat boot. You tell me she doesn’t and I respond because you stole them. And so forth. Trump does not want Canada — and that should end the discussion other than the smile and laughs it brings to our faces every time he suggests it. He is also belittling Canada’s dancing, LARP-ing, blackface Prime Minister and the silly Liberal Party.
Thus, the Ameridemia swing into action seriously debating the pros and cons. Predicting doom from tariffs, etc. But our 12 year old President is not 12 years old, he has done some incredible real estate deals with some of the most aggressive people in the world — those who own property in urban areas. Tischman is not the same as Prudential, nor the widow who owns a home that is in Trump’s way. Trump’s peers growing up are tough, say, and do anything. Play games, buy political favor, and use power to disrupt. Vengeance is applied sparingly, but it used to clear the way for the next deal. It signals: no one messes with me or they pay.
And thus, Trump zigs, zags, maybe throws a tantrum, constantly bombards on Truth Social (and X), lies some, cheats a little, and gets the job done. Kind of like just about everyone else in politics.
Those in Ameridemia are offended, shocked, that this crude man is roaming the halls of diplomacy with a baseball bat. And yet, … he has a goal. And he keeps at it. And he never stops swinging. And if you cave too soon, he changes the deal and asks for more. Real estate. New York City Real Estate. They are not making any more of it — so you fight to get, control, and use it. Because once you fail, it will never come back on the market again.
However, Trump does align with the academics of the Realpolitik, judo, and pragmatism schools. It’s a new school of foreign relations at Johns Hopkins and Tufts. Keep your enemy (every one you negotiate with is your enemy), off balance, complement them, intimidate them threaten them, offer to help them, use their momentum to knock them down…, … . Now try to write an academic book about that.
Let’s talk tariffs. Tyler Cohen and I (note how I slipped behind that one to gain street cred) believe that tariffs hurt the tariff imposing nation. My take is prices rise when one imposes tariffs, central banks step in to temper inflation, interest rates rise and … your currency gains value relative to the exporters. A tariff often leads to lower actual imports or little decline, but at higher prices in a foreign currency which are offset by your stronger currency — globally speaking, production and consumption of goods may decline a little while money rises in value.
Tariffs are likely self-defeating in the long run. But let’s not look at the long run. Threatening new tariffs to remove old tariffs is good politics in the long run because in the short run you shout, “Your mother wears combat boots!”, the other country shouts back, and you wind up finding a compromise. Voters in the domestic butter, lumber, or car business think, “Wow, Trump went to bat for us.” Even the UAW has to admit it is good for US workers.
Manufacturers of goods that get slapped with a short run reciprocal tariff may panic, but those who import may bring back off-shore production, and may curtail foreign investment in Canada for products sold in the US. But, …your constituencies see it a NEW, a different approach, brave, courageous, overdue, and helpful. And in the end, maybe something is gained such as lower overall tariffs or more jobs back in the USA for my neighbors.*
* Neither Ms. Pletka nor any member of her family to our knowledge wear combat boots — that we know of. Or, as Trump said when questioned about his comment that Zelensky is a dictator, “Did I say that?”
No discussion of the Canadian-US relationship is complete without noting the vast differences in how governments manage trade and their economies, especially Canada's heavy protectionism and "supply management" program. While poorly articulated, Trump's tariffs are designed to overcome all non-tariff barriers to trade through Canada's cartel-like systems to establish prices, control production, and keep tariffs high on foreign products. Canada's management of their economy would violate all manner of US anti-trust law.
This is where I fall down on the job - economics. But for Trump, resting his articulation of Canada policy on Mexico style immigration and fentanyl accusations, is just lazy. Yes, he has mentioned non tariff barriers, but hasn’t laid them out in the straightforward way you just did. Thank you!
When Trump started in with calling Trudeau "Governor Trudeau" I thought he had in mind to stick it to the American liberals who long for a wimpy president like that. (The Rolling Stone even once had an article to that effect some time early in Trump's first term). Trudeau is, in fact, the wet dream of many readers of The New York Times and The New Yorker. Beyond that I can't imagine he would really want to bring those losers into the American union--with the possible exception of the province of Alberta, rich in natural resources and home to a population that would vote GOP if part of our country. A larger US-Canadian Union would, as you point out, given the Dems the perpetual majority they are always trying to devise (lately, by importing 11 million new voters from strange places). By the way, Canadians of my acquaintance all have special health insurance policies so that if they need care faster than the 12 or 18 month wait in their own country they can cross the border and see a doctor or a specialist immediately.
The hypocrisy of it all is the stunning thing, right? In Australia, the UK, Canada, and everywhere else there’s national health, the wealthy have their work around to subsidize their luxury beliefs while the poor make do with suicide on demand.
With the permission of a subscriber, jamesmadison951902, I append the note he sent to me. And because, as every AEI economist will tell you, I am not economist, I asked my own colleague and our director of economic studies, Michael Strain for a serious response.
The comment: Admitting one does not understand economics very well is no sin. Tariffs raise the cost of goods for the imposing country and damage the exporting country — then as the tariff imposing country experiences inflation and the central bank tightens rates, raising the value of its currency. Presto, the imposer’s currency strengthens, and the price of imported goods declines. Oooops. Most studies confirm this. So why would Orange Man Bad (OMB) do this. Take him seriously, not literally. This is a negotiating tool to remove any tariffs that either Mexico or Canada have and get to a true free trade deal because the OMB believes America can win competing, but, … he also uses non-tariffs to make that happen. “Gosh GM, nice plant in Saltillo and Oshawa you got there, be a shame if something happened to them”. Next thing you know, GM changes sources. Honda announces it will build it next plant in USA, not Mexico. So OMB calls this a win-win. Cars cost more. But Scott Bessent noted Americans do not equate quality of life with cheap goods. MAGA’s want decent paying jobs that can support families,build communities and strengthen unity — black or white, men or women, and dress up women, … no matter. A good life is a good family, neighbor, faith, community, friends, … and not a government handing out stuff pained ultimately by workers to make people feel better. MAGA is easy — less Walmart, more the person next store is doing OK, has a boat, takes the kids fishing. Democrat, elites, experts, progressives, prog frogs, and socialists are oblivious to this.
And Mike's response:
This is a good question. Most of the defenses of President Trump’s tariffs policy are wrong on their face, but this is one of the best (i.e., most coherent and internally consistent) defenses.
But it’s wrong for a few reasons:
* It assumes that car manufacturers have way, way more flexibility than they actually do. So the defense is unrealistic to the point of naive. It takes years to build a car factory. In the absolute best case scenarios, it would take many years to deintegrate the production of cars across Mexico, Canada, and the U.S. and to return all the activity that currently happens in Mexico and Canada to the U.S. More realistically, it would essentially be impossible (i.e., it would take decades, not merely many years). https://www.bloomberg.com/news/articles/2025-03-06/automakers-need-years-to-move-factories-despite-tariff-relief
* A subtle but crucial point on which it is wrong is that it assumes that trade policy can have a large effect on the trade deficit. It does not. Now, the odds of trade policy reducing a bilateral trade deficit are much better than the odds of trade policy reducing the overall trade deficit. But the 2018-2019 China trade war did not meaningfully reduce economic ties between the U.S. and China, and the same could occur with a North American trade war. https://www.economicstrategygroup.org/wp-content/uploads/2024/10/Strain-AESG-2024.pdf
* It is politically unrealistic to the point of naive. Secretary Bessent’s comment about cheap goods is ludicrous. What he said is equivalent to saying that it is not important for the purchasing power of wages and household income to increase over time. Good luck convincing the American people of that, Mr. Secretary.
* In a literal sense, if the United States diverted workers and capital away from their current uses and towards the types of manufacturing that take place in Canada and Mexico, then American workers would earn lower wages and American households would have lower incomes. It would be an act of economic self sabatoge with no upside. There would be no winners, only losers.
All that said, if what President Trump is doing is an attempt to get the U.S. a more favorable outcome during the upcoming mandatory USMCA negotiations, then that is at least a coherent rationale. I just don’t think that’s what all this is about.
Well, thank you Ms. Pletka. Mike knows his stuff. I can read and listen to your stuff much better from my device than with my dollars. People free to make their own choices is the best economics. I cannot bring myself to trust that Trump is trying to equalize tariffs. Low tariffs in the United States enriches us. He is playing a dangerous game.
Why do you suppose that we, the west, stood together against communism and the Soviets and we don't against the threat from radical Islamism?
Ms. Pletka, another interesting comment/interview by you with a colleague (Canadian no less!!!).
And again I borrow from Salena Zito, “Don’t take Trump literally, take him seriously.”
Those of us who live in America (as opposed to those who live in the Ameridemia (the academy), know what is going on. We played football, have been concussed, have broken bones, know where meat comes from (not plastic wrap containers), and have held a shovel —and not for gardening, understand what is going on. If I tell you I want you to stop doing something and you keep doing it, then I call you a name (who in America likes to ridicule his opponents with names?). I tell you your mother wears combat boot. You tell me she doesn’t and I respond because you stole them. And so forth. Trump does not want Canada — and that should end the discussion other than the smile and laughs it brings to our faces every time he suggests it. He is also belittling Canada’s dancing, LARP-ing, blackface Prime Minister and the silly Liberal Party.
Thus, the Ameridemia swing into action seriously debating the pros and cons. Predicting doom from tariffs, etc. But our 12 year old President is not 12 years old, he has done some incredible real estate deals with some of the most aggressive people in the world — those who own property in urban areas. Tischman is not the same as Prudential, nor the widow who owns a home that is in Trump’s way. Trump’s peers growing up are tough, say, and do anything. Play games, buy political favor, and use power to disrupt. Vengeance is applied sparingly, but it used to clear the way for the next deal. It signals: no one messes with me or they pay.
And thus, Trump zigs, zags, maybe throws a tantrum, constantly bombards on Truth Social (and X), lies some, cheats a little, and gets the job done. Kind of like just about everyone else in politics.
Those in Ameridemia are offended, shocked, that this crude man is roaming the halls of diplomacy with a baseball bat. And yet, … he has a goal. And he keeps at it. And he never stops swinging. And if you cave too soon, he changes the deal and asks for more. Real estate. New York City Real Estate. They are not making any more of it — so you fight to get, control, and use it. Because once you fail, it will never come back on the market again.
However, Trump does align with the academics of the Realpolitik, judo, and pragmatism schools. It’s a new school of foreign relations at Johns Hopkins and Tufts. Keep your enemy (every one you negotiate with is your enemy), off balance, complement them, intimidate them threaten them, offer to help them, use their momentum to knock them down…, … . Now try to write an academic book about that.
Let’s talk tariffs. Tyler Cohen and I (note how I slipped behind that one to gain street cred) believe that tariffs hurt the tariff imposing nation. My take is prices rise when one imposes tariffs, central banks step in to temper inflation, interest rates rise and … your currency gains value relative to the exporters. A tariff often leads to lower actual imports or little decline, but at higher prices in a foreign currency which are offset by your stronger currency — globally speaking, production and consumption of goods may decline a little while money rises in value.
Tariffs are likely self-defeating in the long run. But let’s not look at the long run. Threatening new tariffs to remove old tariffs is good politics in the long run because in the short run you shout, “Your mother wears combat boots!”, the other country shouts back, and you wind up finding a compromise. Voters in the domestic butter, lumber, or car business think, “Wow, Trump went to bat for us.” Even the UAW has to admit it is good for US workers.
Manufacturers of goods that get slapped with a short run reciprocal tariff may panic, but those who import may bring back off-shore production, and may curtail foreign investment in Canada for products sold in the US. But, …your constituencies see it a NEW, a different approach, brave, courageous, overdue, and helpful. And in the end, maybe something is gained such as lower overall tariffs or more jobs back in the USA for my neighbors.*
* Neither Ms. Pletka nor any member of her family to our knowledge wear combat boots — that we know of. Or, as Trump said when questioned about his comment that Zelensky is a dictator, “Did I say that?”