U.S. Secretary of Commerce Howard Lutnick in Washington.Leah Millis/Reuters
Any time Howard Lutnick is interviewed, you’re guaranteed a whole lot of mishegas. But because he’s the U.S. Secretary of Commerce, and his words are tailored to express what he thinks the boss wants to hear, attention must be paid. Even to the nonsense. Especially to the nonsense.
In a Sunday morning chat with the CBS TV program Face the Nation, Mr. Lutnick said some things that are positive for trade between Canada and its largest trading partner. Unfortunately, he said even more things that suggest long-term negatives for our previously free-trading relationship.
On the plus side, he said that the 35-per-cent tariff that U.S. President Donald Trump has threatened to impose on Aug. 1 would not apply to all Canadian exports, but only those outside the United States-Mexico-Canada Agreement. This isn’t news – immediately after Mr. Trump announced the levy earlier this month, White House spokespersons quietly briefed the media that it is not intended to apply to all Canadian goods, only those not covered by the USMCA. But it’s good to hear the exemption reiterated. It suggests that it’s U.S. policy, for now.
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Mr. Lutnick said that 75 per cent of goods currently move tariff-free among Mexico, the U.S. and Canada, while an analysis last month from RBC Economics puts the figure even higher, with 89 per cent of Canadian exports USMCA-compliant in April. Whatever the level, take it as a sign that the Trump administration does not want the markets or the American public to believe that it’s trying to end free trade with Canada.
That’s why Mr. Lutnick justified existing and possible future tariffs on Canada as an action forced upon the U.S. “Unless you stop this fentanyl and close the border,” he said, the U.S. would have no choice but to hit Canada with tariffs.
Though in the next breath he added that, even if Canada addressed the imaginary fentanyl problem, tariffs could remain.
“The President understands that we need to open the markets,” he said. “Canada is not open to us. They need to open their market. Unless they’re willing to open their market, they’re going to pay a tariff. That’s a simple message the President has. It’s fair trade, it’s reciprocal trade. Why should we have our country be wide open while theirs is closed?”
That is the most magnificent mille-feuille of mishegas. It’s layer upon layer of flaky nonsense.
Until five minutes ago, Canada and the U.S. had very low or no tariffs on each other’s exports. The Canadian market is not “closed” to American goods or services, which is why Canada is the world’s largest buyer of American goods and services. Take oil and gas out of the mix, and the U.S. even runs a trade surplus with us.
The Trump administration wants higher tariffs, and it’s willing to tell all sorts of tall tales to get there. It especially needs to tell tales to American voters, because they are not excited about tariffs.
Notice how Mr. Lutnick described Mr. Trump’s trade policy: “It’s fair trade, it’s reciprocal trade.”
To quote noted Spanish trade expert Inigo Montoya, “You keep using that word” – reciprocal. “I do not think it means what you think it means.”
The Commerce Secretary celebrated two recently announced trade frameworks as examples of this reciprocity. There’s an agreement with Vietnam, said to involve a 20-per-cent tariff on exports to the U.S., and an Indonesian deal, with a 19-per-cent U.S. tariff. Details are sketchy, but Washington claims that in return, American goods will get tariff-free access to these countries.
I don’t know what dictionary was the preferred supplier at Trump University, but in every other lexicon, the arrangements with Indonesia and Vietnam are the opposite of reciprocal. They are – and the Trump administration is celebrating them as – asymmetrical trade, not free trade. No tariff for me; a fat tariff for thee.
Prime Minister Mark Carney said last week that the Americans are signalling that they don’t want to make a deal that doesn’t include tariffs, and on Sunday Mr. Lutnick underlined that. It appears to be the Trump administration one clear policy goal in all discussions with its trade partners.
Asked about the 10-per-cent baseline tariff imposed on most countries (but not Canada, at least not yet, because of the USMCA), he replied that “10 per cent is definitely going to stay. Many countries will pay higher.”
As for the future of free-ish trade under USMCA, which he had been touting a moment earlier, Mr. Lutnick said that of course the treaty will have to be renegotiated next year. And he left no mistaking that in his view the U.S. goal in those negotiations would be less free trade and more tariffs. He said, as Mr. Trump has repeatedly said, that the President, “doesn’t want cars built in Canada or Mexico when they can be built in Michigan or Ohio.”
If you’re trying to come to an agreement with someone, and the person on the other side of the table is constantly changing their demands and the reasons for them, there are two possibilities. The first is that they don’t know what they want. The second is that they know exactly what they want.