Adding Injury to Insult, Canada Edition

Posted by Trump on Truth Social

There have been many trade conflicts in history, some of them more destructive than the US-Canada fight. But I don’t think there has ever been a dispute this stupid.

Bear in mind that this crisis is entirely gratuitous. Canada has done nothing wrong. Even if one buys into Trumpian nonsense about how every nation that sells us more than it buys is ripping us off, Canada isn’t a villain. Last year Canada did run a modest trade surplus with the United States in goods, but more than half of this imbalance was offset by a U.S. surplus in services. Overall trade between our nations was almost balanced.

So what is this about? Clearly, we’re looking at a symptom of deranged Trump syndrome. As Trump’s failures, from soaring fuel prices to plunging approval, multiply, he is doubling down on his disrespect for and attempted bullying of our northern neighbor and former ally. That is, you should think of this conflict not as something reflecting U.S. national interests, but as a form of self-medication from a sundowning president.

And the derangement isn’t coming solely from Donald Trump. Yes, he — or more likely Natalie Harp — has been posting puerile insults and images on social media. But we also have Scott Bessent, the Treasury Secretary, comparing our northern neighbor to a “little yippy dog.” This is a bigger deal than it might seem. Part of the job of being a finance minister involves projecting a certain gravitas, so that he or she will have credibility in a crisis. When he sounds like an immature thirteen-year-old instead, that does real damage.

It’s all deeply humiliating — for us, not the Canadians. But beyond the embarrassment, it’s also important to realize that an escalating trade war with Canada will do real damage to the U.S. economy.

Trump and his economic officials don’t appear to understand this (although Bessent may just be pretending to be ignorant.) Their expressed view is that Canada’s economy is too small — a “little yippy dog” — for a disruption of cross-border trade to matter. But this complacency is foolish.

The essential thing to understand about U.S.-Canada trade is that our two economies have been closely integrated for a very long time. We’ve had free trade in autos and automotive products since 1965. We signed an overall free trade agreement in 1988, six years before the creation of NAFTA, which included Mexico. And all those decades of free trade have encouraged a great deal of specialization.

That is, the Canadian economy isn’t a miniature version of the U.S. economy, producing the same mix of stuff on a smaller scale. Instead, Canada concentrates on producing a limited range of goods. In some cases Canada produces goods like lumber or aluminum that take advantage of Canada’s natural resources — vast forests and abundant hydropower, which generates the electricity used to smelt aluminum. In other cases, like autos, Canada achieves economies of scale by manufacturing a limited range of goods, exporting most of what it produces to the United States while importing the auto models and components it doesn’t produce.

The flip side of this Canadian specialization is that while the U.S. economy is roughly a dozen times larger than Canada’s, Canada supplies a surprisingly large share of many crucial goods. Canada provides 70 percent of the oil refined in the U.S. Midwest. Canada supplies about 60 percent of US aluminum. Canada supplies almost all of America’s spruce-pine-fir lumber — preferred for framing in residential construction.

If the tit-for-tat with Canada were to escalate into all-out trade war, could the U.S. economy manage? Yes — but it would be expensive and take a great deal of time.

In short, if Trump, Bessent and company think that trade conflict with Canada is a trivial issue, one that Americans will barely notice, they’re in for a rude awakening.

Now, I haven’t talked about the damage a trade war would do to Canada, but it would clearly be immense — possibly bigger in dollar terms than the damage here, although that’s unclear. What is clear is that because Canada’s economy is far smaller than ours, Canada would suffer much more damage from a trade war as a percentage of GDP than we would.

But Canadians understand why they are being asked to suffer this pain: They are defending their sovereignty and their national identity. Will Americans be willing to suffer economically to soothe Trump’s bruised ego?

No music: Too stretched today.