If Clinton takes office, Canada might need to renegotiate NAFTA.
Should Trump take office, Canada will probably need to renegotiate NAFTA.
If we must renegotiate NAFTA, it will probably be towards protectionism.
My proposal? Unilaterally drop all import tariffs and then negotiate from there.
Even if Trump raises tariffs against us, unilaterally dropping tariffs on our side could still be a good strategic plan for Canada in the long term.
In the short term, if manufacturers must pay tariffs to sell to the US but not to Canada, then they would prefer to relocate to the US.
However, this would also result in a significant drop in the CAD relative to the USD. So while Canada's physical exports might suffer, it could still have a positive balance of trade on other fronts. The low CAD would mean more foreign nationals choosing to visit or study in Canada over the more expensive US. R&D might also move to Canada, online sales of intangible products such as software too. It's hard to impose tariffs in cyberspace.
While such a plan would hurt Canada's physical export industries, it would benefit every non-physical export industry (such as travel and tourism, education, R&D, and the sale of software online) while also creating an economy that would be far more resilient to tariffs. If we must impose tariffs, a counter-intuitive strategy would be to impose not import tariffs but rather an export tariff by weight. Since it would be by weight, value-wise it would be a much higher tariff on a raw material than on a high-value light-weight high tech product for example. This would hurt Canada's raw resource export industry by making its exports expensive. The drop in the export of raw materials to the US would further drop the value of the Canadian dollar, which in turn could make the export of our more value-added products more attractive to US consumers, especially given how import tariffs on the US side and export tariffs on the Canadian side would quickly make US products way overpriced.
Should Mexico and other states impose a similar export tariff, it wouldn't take long before the US' most competitive exports would be raw materials. It would be a booming industry in the US no doubt, but at the expense of the US' value-added manufacturing industry, a kind of internationally imposed Dutch disease on the US economy. It would effectively make the US North America's best-priced and most competitive hewers of wood and gas exporters.
Of course Trump is not stupid and so might reciprocate with similar export tariffs. But between the US and every other country in the world in a trade war, it's clear who would lose the most.
Should Trump take office, Canada will probably need to renegotiate NAFTA.
If we must renegotiate NAFTA, it will probably be towards protectionism.
My proposal? Unilaterally drop all import tariffs and then negotiate from there.
Even if Trump raises tariffs against us, unilaterally dropping tariffs on our side could still be a good strategic plan for Canada in the long term.
In the short term, if manufacturers must pay tariffs to sell to the US but not to Canada, then they would prefer to relocate to the US.
However, this would also result in a significant drop in the CAD relative to the USD. So while Canada's physical exports might suffer, it could still have a positive balance of trade on other fronts. The low CAD would mean more foreign nationals choosing to visit or study in Canada over the more expensive US. R&D might also move to Canada, online sales of intangible products such as software too. It's hard to impose tariffs in cyberspace.
While such a plan would hurt Canada's physical export industries, it would benefit every non-physical export industry (such as travel and tourism, education, R&D, and the sale of software online) while also creating an economy that would be far more resilient to tariffs. If we must impose tariffs, a counter-intuitive strategy would be to impose not import tariffs but rather an export tariff by weight. Since it would be by weight, value-wise it would be a much higher tariff on a raw material than on a high-value light-weight high tech product for example. This would hurt Canada's raw resource export industry by making its exports expensive. The drop in the export of raw materials to the US would further drop the value of the Canadian dollar, which in turn could make the export of our more value-added products more attractive to US consumers, especially given how import tariffs on the US side and export tariffs on the Canadian side would quickly make US products way overpriced.
Should Mexico and other states impose a similar export tariff, it wouldn't take long before the US' most competitive exports would be raw materials. It would be a booming industry in the US no doubt, but at the expense of the US' value-added manufacturing industry, a kind of internationally imposed Dutch disease on the US economy. It would effectively make the US North America's best-priced and most competitive hewers of wood and gas exporters.
Of course Trump is not stupid and so might reciprocate with similar export tariffs. But between the US and every other country in the world in a trade war, it's clear who would lose the most.
