Canada can avoid a Trade War with the USA, as it imposes Trade barriers against us and others. That would be a good thing for the USA in the short term, if not for us. It would be nothing new, like softwood lumbers 27% tariff that went on for years despite NAFTA.
And on that front they likely shot themselves in the foot. I don;t have the research, but I wouldn't be surprised if the drop in Canadian lumber exports to the US caused the US lumber industry to grow, thus creating competition for workers (before the rescession of course) between the lumber and other more labour-intensive industries. With that, lumber would have grown at the expense of other industries in the US. In Canada at the time when we were not in recession, it would have freed lumber workers to look for work in more labour-intensive industries such as furniture making or other. Why would we want to export raw materials to the US rather than add some labour value to them? On this one, Bush did us a favour and hurt his own economy while trying to do just the opposite! Typical Bush.
If the US blocks our (and that of everyone else) exports of iron and steel items, and potentially most manufactured goods, Canada (and that of everyone else) can still sell them our natural raw resources, and purchase America's manufactured goods. That would be good for the American economy. That would avoid a trade war as long as everyone but America does the 'turn the other economic cheek' so that America can rebuilt its economy at everyone else's expense...and avoid a replay of the Great Depression for America.
Now that's one reason I'd suggested simply shifting our taxes to resources from income. This way, we'd be making our resources more expensive and thus discourage people from buying Canadian resources. The lower income tax could help promote manufactured goods and the service industry without having to engage in a trade war as such, since in this way we would not really be saying that we won't import US goods, but merely restructuring our economy so that protectionism or not, it would be more conducive to a more developed economy rather than just strip-mining and forestry and petrol.
Canada can do this, but is the rest of the World willing to do this? 95% of the population of the planet resides outside of the USA, but the USA is the largest consumer market. If the USA will only accept raw natural resources, will the rest of the World accept that? Would every industrialized nation still allow the USA into their markets to partake in their economic stimulus packages to rebuild their economies, knowing that they're excluded from that same American market? That would be good for the American economy.
If the US chooses to accept nothing but natural resources, the US would hurt itself too. After all, if for example a Canadian company wants to be competitive, it wants to buy the best tools, and if the US produces the best tools for that industry, then it would make sense to buy those tools. But if a US company can't do that and buy the best tools even if they come from Canada, then their companies would fall behind in inefficiency in the long term. This could only stunt their development. By shifting our taxes to resources, that would be one step towards protecting our manufacturing base without outright blocking imports of US manufactrued goods. Another point to make is that even if the US manages to block all imports to the US while still managine some exports, that would simply push the value of the US dollar up against ours until they'd find themselves priced out of the market. THey'd be shooting themselves in the foot again.
If the World goes along with this American protectionism, what incentive will the USA have to drop this "Buy American" program in the future? Will China, who holds a monstrous amount of the paper on the American debt, and is a major steel and manufactured goods exporter, go along with this? What would a store chain like Walmart even have to offer for sale and at what price?
Efficiency. Over time, the US economy would make itself more inefficient through protectionism. Yes, it would be making ours more inefficient too, but generally speaking protectionism can protect one industry only by sacrificing another. And if it tries to protect all industries, it will fail. Something will have to give.
If Canada takes a very economically doormat-ish position and accepts another violation of established trade agreements to avoid a trade war with America, and the rest of the worlds economies don't, America will have 'protected' three million jobs directly related to the steel and iron industries, but at the expense of the fifty-seven million jobs directly tied to international trade. I sincerely hope that America thinks this through over the weekend and avoids any of the questions I'm asking from ever having to be answered.
America might manage to protect the steel industry, but woudl sacrifice another industry in the process. After all, by protecting the steel industry, it's taking workers away from other industries. They might not be noticing it now because they're in recession, but they will notice it when a boom comes along. Then a bloated and inefficient steel industry could prove an incumbrance rather than a blessing. Canada's steel industry might suffer in the process, but that would free workers for other industries. If we recognize the basic principle that a tariff hurts both the protecting nation and the exporting nation, then a trade war becomes pointless, because America's own tariffs work against it. Trade wars have no basis in sound economic theory. They're pure political maneuvering in childish democracies, vote-buyers if you will. Instead, let the US hurt us (I'm including the US itself in this 'us'). Instead, let's provide sufficient funding to educate our workers in growing trades and industries. I normally don't support the NDP on most points, but I would love to see the NDP decide on how much funding to provide for education in trades and professions, even if the Conservatives could decide on other points. Though I'd like the NDP decide on military funding too.
