US vs. the world: there are no winners in a trade war

Donald Trump’s trade war has begun. Over the weekend Trump unveiled sweeping tariffs on Canada, Mexico and China, aimed at curbing trade disparities, migrant influx and fentanyl smuggling.

This extraordinary announcement against America’s three largest trading partners raised alarm even among some corners of Trump’s own party and sent shockwaves across the North American economy.

Global markets were quick to respond.

Nasdaq fell 2% on Monday, as did others, and the price of commodities especially oil were higher than even during the current wars in the Middle East and Ukraine.

The Canadian dollar fell to its lowest level since 2003 and threatened to wipe out growth for up to three years.

“Canada will be responding to the US trade action with 25 percent tariffs against CA$155 billion ($106 billion) worth of American goods,” Canadian Prime Minister Justin Trudeau said in a dramatic tone on Sunday, as he warned of a fracture in longstanding Canada-US ties.

For now, those tariffs are on hold for 30 days, following a last minute conversation between Trudeau and Trump, in exchange for increased border security.

Fun fact: Mexico did the same in exchange for 10,000 troops at the border. However, there were already an existing 15,000 troops at the border – a fact that seems to have escaped Trump.

Canada also held off the cancellation of a CA$100 million ($68.12 million) contract with Elon Musk’s Starlink for the time being.

“We’re certainly not looking to escalate. But we will stand up for Canada, for Canadians, for Canadian jobs,” said Trudeau on Sunday. Canada was also quick to roll out ‘Made in Canada’ labels across grocery stores.

China hits back with tariffs on US goods after Trump imposes new levies

On Tuesday, China slapped tariffs on U.S. imports renewing a trade war between the world’s top two economies.

Here’s the question though. What seems to be the end game for the US economy and global trade?

The tariffs and retaliatory measures by both Canada and the US are designed to increase costs for consumers on both sides of the border, especially the US auto industry which relies on 60% of Canadian crude.

Lumber imported from Canada is set to do the same to the housing industry, at a time when many Americans cannot afford to buy their first homes.

“There are no winners in a trade war or tariff war,” China’s foreign ministry said, adding that the additional duties would “inevitably affect and damage future bilateral cooperation on drug control”.

In fact, according to estimates, Canada is responsible for only a fraction of the fentanyl crossing into the US through its border, rendering the steep tariffs an inherently disproportionate response.

“It’s hard to believe that our national security is influenced by our relationship with Canada,” surmised analysts on CNN.

“On migration and fentanyl, you could say these are national security concerns but there are better ways to do that without destroying the integrated and efficient North American production hub that we have spent the last 30 years developing.”

The hub in question is the North American Free Trade Agreement (NAFTA) – an agreement signed by Canada, Mexico and the United States in 1994 that created a trilateral trade bloc in North America.

Trump says Americans may feel ‘pain’ in trade war with Mexico, Canada, China

Let me for a moment, posit the benefits of trade infrastructure already in place, especially between border nations.

As a Canadian citizen who has both attended university and worked both in Canada as well as across the border, the minutiae of these very agreements eliminate red tape, paperwork and waiting times for those looking to live and work.

For example, my student visa to attend NYU was issued to me without any prior application or paperwork, I simply declared the purpose of my stay and walked through immigration with the rest of the tourists on my flight over and entered New York as a student.

I was allowed a year of work on the same visa following the completion of my degree, and when I was sponsored to stay further by my firm, I payed a balance of Canadian and American taxes, all because of an existing system in palace.

It was a very well-oiled machine and obviously at that time did not realize just how many such students and employees were benefitting from said system, negating the need for any oversight and interference.

These protective measures are in place for benefitting aspiring students, businesses and professionals and filtering out the very people – “migrants and criminals” – that Trump claims it is protecting. Taking shots at NAFTA truly makes no sense.

Its worth mentioning here that the last time Trump threatened NAFTA and spent months renegotiating with Canada – that former Canadian Foreign Minister Chrystia Freeland led – came out with an almost identical trade agreement as the previous one, with a slight amendment for Canadian farmers.

It didn’t really bring any real change to trade factions, rather seemed like a farcical exercise. And yet here we are again, less than a decade later, staring down the same barrel.

What will then the current sabre-rattling bring? I guess we’ll find out in 30 days.

The article does not necessarily reflect the opinion of Business Recorder or its owners