Good news within a strenuously spun Reuters article. Don’t get lost looking at the granules; apparently all of the prior Canadian strategy against President Trump has failed.
For well over a year Justin from Canada and Foreign Minister Chrystia Freeland were confident they could leverage the U.S. Chamber of Commerce, purchased DC politicians and ideological allies against President Trump in NAFTA negotiations. The result? Fail, fail and more fail.
Running out of options, Canada now attempts to save their NAFTA construct by turning to the executives within the auto industry:
OTTAWA (Reuters) – Canada’s trade minister last week met senior officials from General Motors Co and Fiat Chrysler Automobiles NV in Detroit, as Ottawa takes its lobbying effort directly to the Big Three carmakers to avert potential U.S. auto tariffs.
The Liberal government is relying on industry partners to press Canada’s cause in the White House and elsewhere, using their influence to protect Canadian interests, sources with direct knowledge of the discussions told Reuters.
[…] The auto industry, Canada’s biggest exporter, represents about 500,000 direct and indirect jobs and contributes C$80 billion ($60.1 billion) a year to the economy.
“Instead of us galloping all over the United States talking to everybody, it’s really focused right now on the automobile manufacturers, the automobile suppliers,” said one source, who requested anonymity given the sensitivity of the situation.
The Canadian message was “now is the time to speak up, now is the time to exercise whatever influence you might be able to bring to bear,” added the source. (read more)
Or put another way…. “Halp”!
Each sequential step in the Trump trade strategy is designed to head-off any counter position by positioning individual best-interests ahead of any defensive group formation.
The Canadian and Mexican economy (due to NAFTA) cannot survive without importing cheap durable goods from China to use in their assembly-based economies, and then trans-ship into the U.S market. However, the U.S. economy can survive, it can actually expand BIGLY, without accepting trans-shipped assembled goods from Mexico and Canada
Put simply, without NAFTA, the assembly processes just moves INTO the U.S because the market *is* the United States. We are the $20 trillion customer. We hold the leverage.
NOTE: “Donnelly said in his opening remarks that there was already a rise in product being diverted to Canada in recent years and signs of even more since the U.S. tariffs began this year.”..
This is evidence of multinationals exploiting the NAFTA loophole to avoid U.S. tariffs. This fatal flaw is at the very heart of the issue within the U.S. trade policy inside NAFTA. As long as Mexico and Canada remain gateways for foreign good assembly and shipment into the U.S. there will never be a way for the U.S. to demand fair and reciprocal trade.
Canada knows their decades-long designed economic position as shipment/assembly trade-brokers is the central issue is the heart of the confrontation with USTR Lighthizer, Commerce Secretary Ross and President Trump. As multinational corporations seek to avoid Trump tariffs they only exacerbate the issue.
If Canada and Mexico don’t try to stop their duplicitous NAFTA benefit scheme, they will end up with even bigger trade surpluses and become even bigger targets for President Trump. In essence, the reason for Canada and Mexico being subject to even more encompassing Trump tariffs’ grows.
If Canada and Mexico do nothing to stop this influx; Trump will levy more than just steel and aluminum tariffs; he’ll likely tax their auto-sector.
As a consequence Canada moves do back-down Red Dragon:
The Canadian government is preparing new measures to prevent a potential flood of steel imports from global producers seeking to avoid U.S. tariffs, according to people familiar with the plans. The Canadian dollar weakened and shares in Stelco Holdings Inc. soared.
The measures are said to be a combination of quotas and tariffs aimed at certain countries including China, said the people, asking not to be identified because the matter isn’t public. The moves follow similar “safeguard” measures being considered by the European Union aimed at warding off steel that might otherwise have been sent to the U.S. It comes alongside Canadian counter-tariffs on U.S. steel, aluminum and other products set to kick in on July 1. (read more)
The bottom line is U.S. market access is what all production countries need for their goods and the sustainability of their economies.