Addressing Trump's 25% tax
As I mentioned on LinkedIn, a 25% tax on all exports to the US from New Brunswick would have significant implications and very few of them would be good. The following table shows the value of NB exports in 2023 -this is goods only (not services) and, crucially, doesn’t include the billions in exports from NB to other provinces.
So what is to be done?
Take a lesson from the NY Times columnist Tom Friedman who is saying that Trump could win the Nobel Peace Prize if he just does what Tom suggests. Of course, Trump has expressed his annoyance many times that he already hasn’t won the prize but Friedman is betting that playing to his ego is the best approach.
Same here.
There are basically three responses to the 25% tariff/tax. One, do essentially nothing and hope cooler heads prevail in the U.S. - as the impacts of raising costs on Americans becomes obvious. Two, a robust response where we put a 25% tariff on all US imports. This is around $400 billion but it understates the size because it doesn’t include services. While most of our exports to them, most imports from the US are manufactured goods and therefore many manufacturing companies in the US would be highly annoyed at Trump. Not to mention all the agricultural products. This would have a large inflationary influence particularly in the shortish term.
The third response is the Friedmanian option. Play to Trump’s ego. We have seen an increase in people crossing the border into the US and at least some fentanyl comes from Canada (or the precursor ingredients). Of course, this pales compared to Mexico. So the Friedmanian approach would be to increase border patrols and cooperation with the US - have a robust new plan- and give Trump a ‘win’. He could take off all the tariffs or a large share and claim that his tough negotiation forced Canada to take the border seriously.
I still think he will still look to put tariffs on specific goods but we could see the broad-based tariff be removed.
Kinda like winning the Nobel prize for trade negotiation.