Canada Must Resist Trump's Tariff Threats
Canada is facing a new round of tariffs imposed by US President Trump, with threats to impose 50% tariffs on Canadian goods. This move comes after Canada removed US booze from its stores in retaliation for American levies.
The Trudeau government has been negotiating with the US administration to resolve these trade tensions, but so far, no agreement has been reached. The current proposal is for Canada to cave on some of its demands, such as removing tariffs on dairy and car taxes, in exchange for the US not imposing new tariffs.
However, Bay Street economist Derek Holt advises against this approach, saying that Canada holds most of the cards due to its energy exports, fresh water reserves, and favourable public opinion. He also points out that the US is facing midterms, which could make Trump more willing to negotiate, and that Canada's economy is currently stronger than the US.
Additionally, Holt notes that Canadian fiscal policy is set to sustainably add to growth, while US fiscal policy is turning restrictive. Canada is also dangling major projects that will be attractive to big investors, and foreign direct investment into Canada is on the rise.