Earlier on Tuesday, the Trump administration announced that it will impose tariffs on Canadian lumber. This is in response to an ongoing trade dispute between the U.S. and Canada involving unfavorable milk prices. Additionally, President Trump accused the Canadian government of subsidizing their lumber industry, which goes against NAFTA rules.
The Canadian foreign ministry wasted no time in defending its position, stating that the tariffs were based on false information. Although the U.S. and Canada are among the closest international partners, the rhetoric surrounding the trade dispute is unusually heightened. That, of course, is directly related to President Trump’s leadership style, which is extremely forward and direct.
In a way, this latest action puts the global community on notice. President Trump has stated from the get-go that the U.S. will no longer be considered the international whipping boy. One of his first executive actions was to put the kibosh on the Trans-Pacific Partnership. That disappointed several countries, particularly Japan. However, the TPP was a very foreign proposal. The Canadian tariff impacts our closest ally — geographically and ideologically.
While patriots can appreciate Trump’s hard-lined stance, we have to confront reality — the Canadian tariff is a complete waste of time. I say that because tariffs themselves are a waste of time. According to the World Bank, hundreds of billions of dollars would open up in free trade and economic activity if nations would stop imposing tariffs on each other.
We also have to stay consistent with our arguments. Last year, I produced a video for Crush The Street in which I explained the furor surrounding the Brexit vote. Essentially, the European Union was a series of tariffs initially sold as the protector of the British economy. Instead, it fostered apathy and poor workmanship because British producers understood that they were being subsidized by their government. What was the point, then, of being competitive in the global marketplace?
In theory, tariffs sound great. In actuality, they are political instruments, nothing more. In a trade dispute such as the current Canadian tariff, the response to taxation is to shift business elsewhere. Prices rise out of control for the imposer of tariffs, while the “tariffed” lose out on a business relationship. Both sides have to open up other revenue channels. That may or may not work.
The better approach is to resolve a trade dispute the way all conflicts should be resolved — via the free market. Protecting businesses, including our own, does nothing but make them apathetic. Only by communicating consequences for one’s actions does a truly capitalistic economy work.
Otherwise, tariffs simply rehash old mistakes.