Canada already in talks to avoid Trump tariffs

Canada has already begun talks with members of Donald Trump's circle about avoiding new trade tariffs if he's elected U.S. president this fall.

If it happens, the Canadians have warned of retaliation.

The public line from Canada for months has been that Trump's proposed 10 per cent tariff should not apply on this continent because of the Canada-U.S.-Mexico trade deal.

But CBC News has learned that a deeper conversation is already underway: Trump's allies aren't promising any relief, and the sides are discussing what a negotiation might look like to maintain tariff-free trade.

The bottom line: within months, Canada could find itself in trade negotiations again with Trump if he wins this election. 

The Trump representatives being non-committal on exempting Canada from tariffs include none other than Robert Lighthizer, his former top trade official who has already said he would play either a formal or informal advisory role in the next Trump administration.

In their discussions with Canadian political and business representatives, he and others close to Trump have made clear there's no guaranteed exemption.

Canada's ambassador to the U.S. acknowledged some of these discussions in public remarks at the Republican convention in Milwaukee on Thursday.

"We're talking to Trump's advisers on this," Kirsten Hillman said during a panel hosted by Politico and CNN.

"We are really urging them to consider what the implications would be." 

The consequence of a U.S. tariff on Canada, Hillman said, would likely include retaliation from Ottawa — with counter-penalties on specific products. 

"Inevitably our government will be under enormous pressure to reciprocate," she said. "So then we have a 10 per cent tariff on that volume of trade on American goods coming into our country. Which is not particularly constructive."

She urged a more co-operative approach, where both countries continue being top customers to each other, and avoid doing harm. 

History repeating

The likely U.S. wish list in any negotiation, sources say, includes a mixture of American priorities, some of which are already in the public domain.

Lighthizer has written that he wants a stricter application of the new trade deal when it comes to auto parts, a position he shares with the Biden administration.

A future Trump administration would also be expected to push Canada to drop its digital-services tax; apply the new trade deal's dairy provisions more strictly; and emulate U.S. trade tariffs on China. 

A Trump administration would likely simultaneously pressure Canada to accelerate its defence spending and could link this issue to tariff threats.

Canadians have their own demands. Ottawa is keen to avoid a drastic renegotiation of the continental trade deal when it's up for review as early as 2026. 

A former top Trump trade official suggests we could see history repeat itself.

Everett Eissenstat was deputy assistant to Trump for international economic affairs and was his personal representative at the 2018 G7 summit in Charlevoix, Que.

That summit famously blew up over steel tariffs.

Canada was originally subjected to those tariffs, then spent months negotiating its way out. In the end, Canada promised to limit how much overseas steel it imports and sends into the United States.

"I don't see an automatic exemption for anybody, candidly," Eissenstat told CBC News on Thursday, when asked whether Canada might get automatic relief from a future Trump administration.  

"Is that a definitive prognosis? No. I'm just saying there's nothing that I have seen that indicates that there will be an exemption."

Trump has been extremely vague on the details of his proposed global tariff plan. Eissenstat said he hasn't heard anything about any country being spared, or specifically targeted.

It's also unclear how Trump might do this unilaterally, without Congress approving. Eissenstat pointed to emergency measures in existing law as possibilities. 

They include a 1974 U.S. trade law, specifically its sections 201, 232 or 301, or perhaps the International Emergency Economic Powers Act.

Now a partner at Squire Patton Boggs in Washington, Eissenstat made clear that his analysis is his own, and he's not speaking for the Trump campaign.

Tariffs as leverage

A number of Canadians also saw Lighthizer recently when he was in Calgary, meeting with Alberta Premier Danielle Smith and the Business Council of Canada.

The council's head has expressed concern that Canada is unlikely to receive an easy pass.

"[They're] not mincing words," Goldy Hyder told CBC News, referring to the Trump team's plans to use trade actions to rebalance imports and exports.

"I think they're making it pretty clear that they're going to impose tariffs quite broadly and almost immediately." 

He said Canada needs to start making the case, immediately, that tariffs harm Americans, might worsen inflation and would be counter-productive.

There's one potential reason Trump would refuse to promise Canada a pass: leverage. One trade expert from Canada says the threat of tariffs potentially means power as countries return to the negotiating table.

"They are challenging discussions and… they almost always require a bit of give and take," said Martha Harrison, an international trade lawyer with the firm McCarthy Tetrault.

"The question would be — in a Trump presidency that were willing to offer some kind of exemption to Canada — what would the exchange be?"

This week's Republican convention has entrenched the party's longer-term shift toward Trump's trade philosophy: more protectionist and nationalist, in the hope of reshoring manufacturing jobs to the U.S.

Canada will take a hit as part of this project, says another Republican trade adviser who supports Trump's more nationalist approach.

In a podcast episode, Oren Cass was asked why companies wouldn't just set up in Canada if the U.S. imposes tariffs; that way they could import parts without the tariff, assemble everything in Canada, then ship the finished good across the border.

"When you say, 'Well, maybe I'll go do it in Canada instead,' well, the answer is, 'No, you won't,'" Oren Cass told the New York Times' Ezra Klein podcast.

"Because if you do, then you're going to have to pay the 10 per cent tariff when you try to import the [product] into the U.S. anyway. It is going to be more advantageous to [build] in the U.S. market."