Trump's tough stance on Canada 'boils down to political theatre'
Andrew Harnik/AP
The US slapped new anti-subsidy duties on Canadian softwood lumber imports, President Donald Trump tweeted critically about Canada's dairy-pricing policies, and the outlook for NAFTA negotiations looks increasingly uncertain.
The recent fixation on Canada may have come as something of a surprise to market watchers, given Trump's primary focus on China, Mexico, and Japan during the presidential campaign, as well as his meeting with Canadian Prime Minister Justin Trudeau in February.
Nevertheless, Trump's rhetoric and actions have not spooked analysts, who argue that this isn't the start of a trade war between two North American economies, but rather some political jockeying by the administration.
"US tariffs on Canadian softwood lumber imports will not mark the beginning of a spiraling trade dispute between both countries," BMI Research analysts said on Thursday in a note.
BMI Research
US Commerce Secretary Wilbur Ross said late Monday that his department will slap new anti-subsidy duties on Canadian softwood lumber imports. He told Reuters the duties, averaging 20%, would affect $5 billion worth of imports.
Trump then took a shot at Canada's milk-pricing policies on Tuesday, which he argued effectively blocked US exports from the Canadian market and put American farmers at a disadvantage.
It's notable that lumber is a long-standing issue between Canada and the US, and that Canada's lumber exports make up a relatively small share of overall Canadian goods exports, according to BMI Research. As for dairy, the US actually exports a larger share of products to Canada than it imports, which you can see in the next chart.
BMI Research
On Wednesday, Politico reported that the administration is considering an executive order on withdrawing the US from NAFTA. Later in the day, however, a White House statement said Trump told leaders of Canada and Mexico he will not "terminate" the treaty, but will aim to renegotiate instead.
"A lot of this boils down to political theatre. As long as Canada and Mexico offer token concessions, the White House will be able to claim its hardball negotiating tactics were a success," Paul Ashworth, chief US economist at Capital Economics, said in a note on Wednesday.
"So is President Donald Trump serious about protectionism after all? We're not convinced that he is," he added. "Even if the executive order did begin the withdrawal process, the motivation would presumably be mainly to put more pressure on Canada and Mexico in those upcoming negotiations."
The Mexican peso is up by 0.8% at 19.0334 per dollar, while the Canadian dollar is down by 0.2% at 1.3645 per dollar as of 10:48 a.m. ET.
- I quit McKinsey after 1.5 years. I was making over $200k but my mental health was shattered.
- Some Tesla factory workers realized they were laid off when security scanned their badges and sent them back on shuttles, sources say
- I tutor the children of some of Dubai's richest people. One of them paid me $3,000 to do his homework.
- Why are so many elite coaches moving to Western countries?
- Global GDP to face a 19% decline by 2050 due to climate change, study projects
- 5 things to keep in mind before taking a personal loan
- Markets face heavy fluctuations; settle lower taking downtrend to 4th day
- Move over Bollywood, audio shows are starting to enter the coveted ‘100 Crores Club’