After Donald J. Trump’s presidential inauguration on Monday, Canadians will find out whether he intends to follow through on his threat to immediately impose 25 percent tariffs on Canadian exports to the United States.
Many people here have told me they can’t wait for the details of the federal government’s response to any US trade action. Matina Stevis-Gridneff, head of our Canadian office, reports that this will be similar to Canada’s response to the aluminum and steel tariffs that Mr. Trump imposed during his first administration. Any upcoming retaliatory tariffs, she writes, “will focus on goods made in Republican or swing states, where the pain of tariffs, such as pressure on jobs and the bottom line of local businesses, would affect Trump’s allies.”
(Read: Canada’s Trade War Plan: Pain for Red States and Trump Allies)
But given the size of Canada’s economy, the country cannot inflict the same amount of damage that the United States can. This raises the question of whether retaliation, no matter how politically targeted, will be effective.
Of course, there is no way to answer that question. But an earlier trade war between Canada and the United States may offer some hints of what’s to come.
In 1930, as today, the North American neighbors were each other’s largest trading partners. But the mix of goods was quite different: on the one hand, Canada imported most of its oil from the United States, while today oil and gas are Canada’s largest exports.
A movement by American farmers to shut out competition from imports, including from Canada, in order to raise prices grew into a comprehensive piece of legislation known as the Smoot-Hawley Tariff Act. It raised already high tariffs in the US, bringing the average import tariff to a whopping 59.1 percent in the end.
Then, as now, many economists condemned customs duties. More than 1,000 of them unsuccessfully petitioned President Herbert Hoover to veto the bill.
Historians and economists still debate the impact of Smoot-Hawley on the Great Depression. But paper from 1997 three economists from Lehigh University in Pennsylvania document how this has hurt Canada’s economy and deeply influenced its politics.
Most of the seven largest exports from Canada to the US at that time, the newspaper writes, had a big drop. Exports of milk and cheese fell by 65 percent, and cattle sales in the US fell by 84 percent.
Before Smoot-Hawley, William Lyon Mackenzie KingLiberal Prime Minister, planned to reduce tariffs on Canadian imports of American goods. Hoping to avoid a trade war, Mackenzie King matched the new US tariffs on just 16 products, which accounted for 30 percent of imports from the United States.
Like Prime Minister Justin Trudeau today, Mackenzie King led a minority government. He passed the laws with the support of the Progressives, a party supported mostly by farmers.
During the 1930 election campaign. RB Bennett, Conservative leadermercilessly attacked Mackenzie King for not retaliating more forcefully against the United States.
Bennett’s speeches about the benefits of high tariffs were strikingly similar to today’s announcements by Mr. Trump on social networks on the subject.
“How many tens of thousands of American workers are living off Canadian money today?” he said during the campaign in Quebec. “They have jobs and we have soup kitchens.”
He promised the crowd that he would use tariffs to “break a path to markets that are closed.”
A Lehigh newspaper vote analysis concludes that tariff issues were a key factor in Bennett’s 1930 election victory, giving the Conservatives their only majority government between 1911 and 1958.
Although Bennett raised tariffs, they failed to penetrate any markets, says Robert Bothwell, professor emeritus of Canadian history at the University of Toronto.
But, Professor Bothwell told me, Bennett found another solution, which involved expanding on one of Mackenzie King’s actions: when he imposed tariffs on American goods, Mackenzie King also reduced them to 270 products from Britain and other countries within his empire .
Bennett hosted a conference in Ottawa this led to a series of agreements between Britain and its former colonies that greatly opened up trade between them by reducing and in some cases eliminating tariffs.
That deal, Professor Bothwell said, could not offset the economic collapse of the Depression or completely replace the American market for Canadian exports, but it greatly mitigated the damage caused by Smoot-Hawley.
“We had a failure and it really worked in the 30s,” he said. “Every time the Americans raised their tariffs, we would trade more with the British.”
When Franklin D. Roosevelt succeeded Hoover as US president in 1933, Professor Bothwell said, his administration soon noticed the loss of exports to Canada, fueled by a combination of US tariffs and the imperial arrangement with Britain, and moved to compromise on trade.
Today, there is talk that Canada will once again try to increase exports with countries other than the United States. But Professor Bothwell said changes in trade, manufacturing and transport made a repeat unlikely.
“We don’t have an obvious alternative,” he said. “I don’t see that we will be able to absorb the same amount of exports as we had in the 30s.”
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Mark Carneyformer governor of the Canadian and British central banks, and Chrystia Freelandformer deputy prime minister, both have officially announced their campaigns to succeed Prime Minister Justin Trudeau as leader of the Liberal Party.
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With the Buffalo Bills and Detroit Lions both Super Bowl contendersNFL fans in Canada have two border town teams to root for.
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It’s Canada sends air tankers and dozens of its battle-tested wildland firefighters in Los Angeles.
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Footage from a home security camera shows a puff of smoke, along with the sound of an explosion, as a meteorite lands in Charlottetown.
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In the lawsuit, Drake accused his label Universal Music Group of putting his life and his reputation at risk by releasing and promoting a popular diss track of his musical rival Kendrick Lamar.
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In Opinion, Times columnist Ross Douthat argues for Canada joins the United States. Two readers come forward with invitation rejection letters.
Ian Austen he reports on Canada for The Times based in Ottawa. He covers the politics, culture and people of Canada and has reported on the country for two decades. It can be reached at [email protected]. More about Ian Austen
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