The media has a lot to cover. There are geopolitical tensions in North Korea, and election drama in France. The stock market rallies lead to all time highs in the NASDAQ and technology stocks. Underlying economic fundamentals continue to evolve, with the home prices spiking on high demand and still low mortgage rates. The debate in Congress and the white-house about building a border wall could spiral into government shutdown. There’s a lot of heat and drama, so that news media has plenty to work with.
There is one story that isn’t getting as much ink (or pixels, if you read your news online) as it deserves. Donald Trump’s new proposed tariffs on Canadian lumber, which can range from 20% to 40%. It seems like such a trivial thing, and lacks the explosive volatility of other stories, so you can see how it gets lost in the shuffle. Canada itself seems like a stable trading partner, so of course modest trading disputes between friends and neighbors don’t raise a lot of eyebrows. Generally, these trade disputes are worked out over a few quiet court cases and negotiated settlements.
This time, it’s different. For my money, this is the most underappreciated story of the week, with the potential to spiral out into greater impact. For all the bluster and change in tone, President Trump hasn’t actually done very much to change policy yet. Many of his executive orders are wish-lists without enforcement or simple declarations or reiterations of existing policies. Most substantive action requires Congress to enact and, excepting the Supreme Court placement, there hasn’t been much alignment between the Republican dominated Congress and the white house. One area where Trump’s actions do have teeth, however, is in international relations and trade deals. Trump’s ire towards Mexico has already been documented, but his new focus on Canadian trade complaints, like the dairy industry and timber, is an expansion of his complaints on NAFTA.
Every action has a consequence, and Donald Trump’s America First rhetoric has not endeared him to the international community. For instance, public opinion in Mexico has strongly been in favor of full scale, retaliatory resistance towards any border adjustment tax, tariff, duty, embargo, or other Trump-led punitive anti-trade action, even at the cost of Mexico’s short term well being. Canada isn’t likely to be different and political pressure is already building for a response, once the details on the tariff are finalized. Shutting down, or even slowing up, trading arrangements with our largest partners will have a measurable deleterious effect on our combined fortunes across North America.