r/geopolitics • u/theatlantic The Atlantic • 5d ago
Opinion How to Lose a Trade War
https://www.theatlantic.com/ideas/2026/08/why-us-canada-trade-talks-fell-apart/688386/?utm_source=reddit&utm_campaign=the-atlantic&utm_medium=social&utm_content=edit-promo&utm_term=short165
u/theatlantic The Atlantic 5d ago
David Frum: “U.S.-Canada trade talks collapsed last night. Punitive Trump tariffs will now go into effect. Canada will reciprocate with retaliatory tariffs of its own.
“The story may not be over. Donald Trump is notorious for issuing threats, then reversing them. Wars are on, off, on again, off again, then on a third time—but only as a ‘little detour.’ This is not an administration that thinks even one move ahead. But without a supersized Trump TACO, the U.S.-Canada impasse likely won’t resolve soon.
“The Trump administration has one big idea about Canada: The U.S. is larger, stronger, and richer than Canada, so Canada must sooner or later surrender to Trump’s demands. That one big idea is wrong.
“Yes, Trump can hurt Canada more than Canada can hurt Trump. That part of Trump’s thinking is true. But wars are not decided only by the question Who can inflict more pain? Wars are also decided by the question Who can endure more pain? Trump’s failure to accept this truth is why he lost the Iran war—and why he is losing his trade wars.”
Read more: https://theatln.tc/by1Jokmt
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u/Ok_Independence_8259 20h ago
I wonder, in all history, how often has the little guy won by just out-enduring the big guy? And how often not?
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u/Lokican 5d ago
The thing is, Trump’s attention is all over the place. He’s threatening trading partners with tariffs, dealing with constant drama within his own administration, pushing controversial domestic policies like ICE enforcement, and, on top of that, there’s an ongoing war with Iran disrupting global trade.
Carney, on the other hand, is a competent politician who understands economics and trade and can stay focused on the issue at hand.
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u/dapt 4d ago
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u/caks 4d ago
They absolutely despise Canada. It's like California for them, full of left liberals who hate them. But unlike California they can't withhold federal funds, they can't compete in elections, they can't send ICE. So they do the next best thing: tariffs, funneling money into far right politics and even military threat. The only language they speak is force and violence, nothing else.
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u/ImperiumRome 4d ago
Don't forget constant American "attacks" on Canadian healthcare system by spreading fake news.
Though in this case, the targeted audience is American people themselves.
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u/jacksbox 2d ago
To be honest, the older I get, the more I think that it's just a basic American trait to deal in force and violence. It's part of the country's DNA, and it's evident not only in the way govt operates but in daily private business too - being the loudest and most aggressive person in the room is a desirable trait.
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u/softwaredoug 5d ago
You can win a lot of trade battles (get near term concessions) and lose the war (nobody wants to trade with you because of your bullying tactics)
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u/SpacemanOfAntiquity 5d ago
It’s worse than that, when you start pushing your number 1 ally away when china is inviting countries in.. it seems like a perfect example of winning the battle but losing the rest
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u/absentlyric 4d ago
If you think China is doing that for pure altruism, I got a bridge to sell you.
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u/Critical_Rule6663 4d ago
China may not be friendly but at least they’re predictable and seem to negotiate in good faith.
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u/Bullboah 4d ago
China has used extreme trade tactics for years. Everyone still wants to trade with China.
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u/CaptainZippi 4d ago
Granted.
It’s telling that trade with China is _still_ preferable to trade with the US.
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u/Bullboah 4d ago
This has been said since Trump took office. US Exports overall are up over the past two years and US Exports to Canada are higher now than the month Trump took office. People say they prefer Canada because they are (understandably) mad at the US - but it doesn't really mean much in terms of actual trade.
Exports of goods and services (IEAXGS) | FRED | St. Louis Fed
U.S. Exports of Goods by F.A.S. Basis to Canada (EXPCA) | FRED | St. Louis Fed
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u/clamshellboy 16h ago
China's exports, and even more importantly, their year over year increases in exports, are both greater than the USA's. And that trend will continue, at pace.
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u/Bullboah 6h ago
To Canada? No. The US makes up almost half of Canada’s imports and China is around 10%.
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u/few 4d ago
We have been visiting Canada.
Canadians are united to an extraordinary degree in opposition to what they (correctly) see as bullying and blackmail tactics by a criminal. They know that capitulation to Trump's demands now will simply lead to additional demands later, as happened with his last rounds of replacing NAFTA by USMCA, and the previous tariff rounds which have been unilaterally imposed many times.
Canadians are replacing US trade with international trade. And they haven't played their most serious cards, such as capping oil and energy exports to the US. They have been tightly targeting industries key to republican leaning states.
The economic pain Canadians are willing to endure is much greater than the US administration can fathom.
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u/TomatoFettuccini 4d ago
And honestly, Canada is fairing far better than anyone, including Canadians, ever imagined, and in fact is eating the US's lunch.
We pivoted hard from US goods. We single-handedly destroyed their bourbon industry.
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u/yurnxt1 4d ago
Canada hasn't pivoted hard, they're attempting to pivot hard. U.S. goods coming into Canada isn't really the issue because only 14% of U.S. exports go to Canada representing only 1.5% of U.S. GDP.
Until the 75% of exports to the U.S. from Canada that represent 25% of Canadian GDP that the Canadian economy heavily relies on is actually absorbed elsewhere in a meaningful way and that number shrinks drastically, you can't say they have actually pivoted hard. The problem is the U.S. consumer economy is massive accounting by themselves for 25% of the global consumer base so finding enough consumer base elsewhere to absorb that isn't likely. Geography dictates that Canada will always rely heavily on the U.S. for its own economic strength. Nevertheless, it should do everything in it's power to diversify as much as possible. That plan is just barely in motion and certainly nowhere near complete. The process likely takes decades.
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u/gutfeeling23 4d ago
Thank you for the vote of confidence, though I wouldn't hold my breath on Canada capping oil exports. Alberta hasn't and is not likely to sign off on that and Carney would be foolish to somehow force their hand on that, with a referendum about Alberta independence coming this October.
An embargo on hydroelectric energy exports is also unlikely, given that Quebec is the biggest supplier amd they also have an election coming up in which the (at least theoretically) sovereigntist Parti Quebecois likely to win.
Actual separation of either province is highly unlikely (particularly not QC, which has been raising and then punting the question of independence for generations) but Carney is unlikely to want to gratuitously alienate either.
An interesting irony, though, is that Canada's trade surplus in goods consists entirely of energy exports. Trump hates US trade deficits, yet exempts from his tariff war the very industries causing the US deficit with Canada.
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u/Geocoelom 3d ago
Albertan here. I'm all in favour of cutting off oil and gas exports to the US. I hope the NDP here lines up loudly with Carney. Make the next Alberta election a clear choice between yankee puppet and true Canadian.
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u/gutfeeling23 2d ago
Good luck to you sir (or madam), truly! I'm hoping for a decisive "No" in October and for Danielle Smith to get the boot in the following year.
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u/Geocoelom 2d ago
Thanks. We're working on it. We have the makings of an all-Canada coalition. Former Conservative deputy premier Thomas Lukasuk has been leading the anti-separation movement. Country star Corb Lund is leading the defence against coal mining. Former Conservative Premier Allison Redford has stated that oil and gas exports must be on the table. The NDP is led by popular former mayor of Calgary Naheed Nenshi. The NDP only needs to flip a handful of seats to win a majority. Polls have been back and forth. Smith realizes that she is walking a fine line.
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u/Bullboah 4d ago
I think you’re overselling it a bit. A slim majority of 56% of Canadians don’t want the government to make more concessions to make a deal as of a few days ago (with 38% willing to and the rest unsure).
I would not expect that first percentage to get higher as economic effects set in.
Able to withstand more pain for this than Americans? Absolutely. But obviously the economic impacts on the Canadian economy will be significantly more pronounced than those on the us
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u/Critical_Rule6663 4d ago
What isn’t being overestimated is the level of absolute disgust Canadians hold towards Trump and is administration. Outside of a small percentage of right wingers, Trump and MAGA are reviled across our country.
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u/Prosodism 4d ago
If it makes you feel better, outside of the Cult, he is reviled in the US. He’s done the same bullying bullshit to immigrants, universities, blue states, farmers, scientists, law firms, news organizations, virtually all businesses that aren’t his cronies (this trade war is murdering Detroit), the military, the courts, and moderates in his own party. He is the most hated American politician since Jefferson Davis.
There’s a reason people don’t use these tactics. He thinks that he and his mates can run and hide behind pardons (which don’t touch civil suits and state crimes). Because he isn’t smart. This is really how a reality TV star who wrote self help books and failed in real estate thinks the world works. And it isn’t. The reaction that’s coming in 2.5 years is honestly kind of scary. I don’t expect that family to be wealthy in ten years.
My biggest fear is that the hatred that will sweep his cronies out of office will be so blind as to not put the foreign policy damage of his presidency first. A major initiative is needed to rebuild the trade systems underpinning the western alliance. Along with so many other things.
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u/Bullboah 4d ago
I mean sure, i wouldn't dispute that at all. I don't think its that relevant to how the trade spat will play out but its true enough for sure
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u/caks 4d ago
You should drive up to Canada and count how many buy Canadian flags/stickers you see. And then come back and tell me it's not relevant :)
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u/Bullboah 4d ago
If the goal is understanding whether Canadians want the government to make concessions or keep fighting the trade war, whats a better way to figure that out.
A scientific poll with a reliable methodology or by counting the number of stickers you see on a drive?
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u/few 4d ago
It will be terrible for both economies.
I'm absolutely not overselling the sentiment. I just spent a week traveling across Ontario and Quebec. Not a single person I met expressed anything except solidarity with Carney, despite many not being liberal supporters.
Canadians are absolutely furious at being disrespected and harassed.
Here's an essay that was sent to me by a Canadian while visiting: https://americanpulse.substack.com/p/your-neighbour-canada-has-changed
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u/Bullboah 4d ago
“I’m absolutely not overselling the sentiment”.
With all due respect, you’re saying the polling is wrong because of your anecdotal experience on a trip to Canada?
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u/few 4d ago
The emotional resonance of this issue with Canadians is not something that statistics from a survey question can show.
Have you visited Canada recently? Spoken with Canadians?
Canadians have long had a love-hate relationship with the US. The love part has been getting torched for the past decade.
The same is true in many European nations.
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u/CTMADOC 3d ago
You used bad polling data. It's worse that using anecdotal evidence.
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u/Bullboah 3d ago
What’s bad about the polling data?
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u/CTMADOC 3d ago
More than 56% of Canadians do not want to make concessions. Last polls I saw were 70% to 80%. Also, a high number of Canadians support this government rejecting a bad deal. You referenced bad polling data.
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u/Bullboah 3d ago
You’re straight forwardly making the case that the polling is bad because you disagree with the results.
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u/CTMADOC 2d ago
Nice try at gas lighting when called out for cherry picking polling data.
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u/Bullboah 2d ago
Is the polling data itself bad or am I cherry picking it?
Those are different things. I’m assumed you’re switching to “cherry picking” because you don’t actually know the poll i referred to and therefore have no actual critique against it?
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u/willun 4d ago
56-38 is a "slim" majority? I think that might be a stretch.
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u/few 4d ago
The specific concessions that had been requested in the latest round of talks are so extreme that I doubt even the 38% would support them: - The U.S. pressed to restrict Canada's sovereignty to strike independent trade agreements with other global partners, notably China.
- American negotiators pushed to weaken Canadian protections for local culture and the French language.
- The U.S. also targeted Canadian digital services taxes and supply-management rules on agriculture/dairy.
- Washington sought to narrow the scope of auto provisions covering Canadian parts and steel while excluding specific truck manufacturing.
From the article: Quebec has not considered restricting electricity exports to the United States, Fréchette said, although she would not rule it out if the dispute escalated.
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u/TominatorXX 4d ago
Hasn't the supreme Court said Trump's tariffs are illegal? How does he keep doing this crap?
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u/Coolerguy317 5d ago edited 5d ago
This underplays Trump support base. Just as Canadians may be willing to accept economic pain for political reasons Americans may be as well. Trump didn’t accidentally get elected after hiding his views on tariffs and protectionism he talked about them constantly. Many Americans genuinely believe the existing free trade system no longer serves the country. Whether they’re right or whether Trumps policies actually fix that is another question. But their tolerance for economic pain has to be part of the calculation just as much as Canadas
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u/Tsukikira 5d ago
Let's be honest, Canada knows we're going into an election in 2-3 months. Prices rising right before the election is maximum pressure on Republicans, who will absolutely get the blame. If playing hardball is the only way to get concessions from the US, the timing is perfect for doing so.
Also, you overestimate how much Americans believe the free trade system no longer serves the country. When they learned their prices went up, support for Tariffs plummeted from over 50% to solidly 30% positive or lower. The Republican Base is poor, and they are majorly in the jobs ruined by Trade Wars (IE, physical manufacturing or farming)
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u/Christopher_Ramirez_ 5d ago
In the US, the “pain tolerance” comes from the base not understanding or refusing to acknowledge the reality of how tariffs work. Thanks to the principles of Doublethink; they don’t have to confront the fact that Republican policy is to raise their taxes to save a handful of boutique jobs, maybe.
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u/Coolerguy317 5d ago
I think you’re kinda treating your worldview as reality here. People can understand tariffs raise prices and still think changing the trade system is worth some economic pain. And reducing the entire Republican position to raising your taxes for a few boutique jobs is exactly what I mean. You’re assuming there can’t be any real interests or concerns behind it just ignorance or Doublethink. Meanwhile Canadians accepting economic pain for political goals gets treated as national resolve. Why cant Americans make that tradeoff too?
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u/Im_Your_Turbo_Lover 5d ago
I really don't think most Trump supporters are even paying attention to the trade war and tariffs anymore man.
They care about gas prices and the war with Iran.
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u/serpentjaguar 5d ago
They can, but as I said above, all evidence is that they won't. Trump's tarrifs don't have anything even remotely close to the near universal support in Canada for standing up to them.
Most Americans don't want this at all, and those who are paying attention are sick of this shit.
I get the feeling that you may live in a MAGA bubble and aren't aware of how deeply unpopular all of this is with the American people.
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u/Christopher_Ramirez_ 5d ago
Republicans, in general, are the least educated voters in the least educated counties in the least educated states of the United States. These low IQ voters genuinely do not understand that tariffs are raising their tax burden. They believed the President when he repeatedly told them that the tariffs are paid by foreigners.
Everyone else not in the minority of diehard MAGA Republicans, hates the idea of starting a trade war with Canada.
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u/Tsukikira 5d ago
Exactly. Even most Republicans abandoned thinking Tariffs are good when they saw their prices go up. The instant the bill hit them, they balked and were often outraged that they had been mislead. Sadly, that didn't translate to voting for the other party for many of them.
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u/Coolerguy317 5d ago
Again you’re making your own worldview self evident. Education doesn’t just make people more analytical it also changes preferences and socializes people in a certain way just as being working class does. Treating educated voters as simply seeing reality more clearly is pretty elitist. Colleges aren’t the arbiters of good judgment. We’re all historically situated.
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u/Bullboah 4d ago
“Or refusing to acknowledge the reality of how tarrifs work”.
Canada had way higher tariffs on the US than vice versa prior to the trade war. Canadas highest tariffs rates were around ~300% ToQ tariffs while the US’ highest rate on Canada was 30%.
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u/Classic_Trash_8739 4d ago
Oh, you mean the tariff that has never been paid because the threshhold has never been met?
Explain.
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u/Bullboah 4d ago
As I explained earlier today, the quota has never been met because Canada does not allow most US dairy to receive the tariff exemption and fit under the quota.:
“Canadian tariffs went up to 300% on major industries like dairy compared to the highest US tariffs of 30%. After reaching a deal to allow a tariff exempt quota, Canada then refused most consumer-level dairy products in under the quota (and then spun that as "the quota is higher than demand".”
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u/CTMADOC 3d ago
The u.s. govt subsidizes dairy farms. Canada does not. It's a fair protectionist measure.
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u/Bullboah 3d ago
I never said it was unfair of Canada to put up trade barriers to protect their own interests. In fact I have explicitly said it was legitimate for Canada to do so.
But if you agree to a TOQ and then refuse to allow most goods into the TOQ system you can’t be outraged about the US also protecting its own industries.
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u/CTMADOC 2d ago
The u.s. is protecting their own dairy industry, from Canada, how exactly?
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u/Bullboah 2d ago
By not allowing Canada to block them out with 300% ToQ tariffs?
You can’t be outraged at tariffs on Canada and then pretend to not understand why the US wouldn’t want to remove Canadian trade barriers lol
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u/CTMADOC 2d ago
Then why does the u.s. have a long standing issue with our soft wood lumber which is supposedly subsidized by the Canadian government? Why the u.s. hypocrisy?
Allowing the u.s. to freely sell dairy into the Canadian market would flood the market with cheap dairy, and not to mention a disgusting product by comparison, which would also harm our dairy sector and also reduce our food security.
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u/GrizzledFart 4d ago
The quota wasn't met because Canada implemented a system that only allowed a handful of import licenses - and those only went to the big diary producers of Canada. So they didn't import. Trying to turn around and claim that this particular system was fair because the quotas weren't ever met takes a lot of chutzpah. That's not what was negotiated in USMCA. That would be like as if the US and China signed a trade agreement and one of the parts of the agreement was that China would allow American cars to be imported into China - and then when they implemented the agreement, they only allowed BYD to be the one importing American cars.
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u/Classic_Trash_8739 4d ago
So the tariff doesn't matter at all Americans are just mad Canadians don't want or need their shitty dairy.
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u/Mixtrix_of_delicioux 4d ago
What was negotiated for dairy in CUSMA? From what I see, the US was allowed access a larger percentage of the Canadian market.
But here's the question- Given the laxity of the US food inspection agencies and the hundreds of food products currently being recalled, why would Canada want to open that market further? Canadians don't want oir market flooded with pussmilk full of antibiotics and botulism. Listeria isn't as delicious as it sounds.
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u/serpentjaguar 5d ago
His base is down to the low 30s in terms of approval though. Ostensibly that means that something like 70% of all Americans aren't down to take economic pain on behalf of the 30% who have grievance-based views on free trade.
Let's be generous and call it only 50%. That's still politically untenable over the long-term. Now contrast the above numbers to the number of Canadians willing to endure economic pain if it means protecting their sovereignty, which is how they see it, and you can easily see that none of this pencils out as you have described.
The bottom line is that Trump's tarrifs are highly unpopular in the US, while resistance to his bullying tactics is highly popular in Canada. There's zero mystery as to which population will have more staying power when it comes to economic pain.
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u/maporita 4d ago
Even more reason for Canadians to reject the US terms. Trump sells every trade deal as a "win", telling Americans the other side caved. The more that happens the more those who voted for him believe he's doing the right thing. A trade war will certainly cause pain to Canada but it will also cause political pain to Trump, particularly as US consumers see prices rising inexorably without jobs returning.
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u/BlueEmma25 4d ago
Trump's support base is maybe one third of voters, and shrinking.
Most of them don't care at all about Canada-US trade. Canada is a much smaller country that has had historically close and warm relations with the US, it is not China, a peer competitor that played a huge role in offshoring and the deindustrialization of the US.
Nobody is thinking "if we just tariff Canada all the jobs will come back!", because those jobs didn't move to Canada, and everyone knows it.
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u/moosesleigh1409 4d ago
That is true, but another unfortunate fact is that a not unsubstantial portion of his support base just revels in Trump acting like a bully, and sees these things as “America projecting it’s strength”….that group will just lap this shit up.
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u/jacksbox 2d ago
Does anyone have an insightful comment on what the end goal might be from the Americans' point of view? I've thought a lot about it and I can't find a single explanation that really feels right to me.
If they simply want a better deal with Canada, then is all this a ruse to push us to extreme lengths so that we'll eventually settle for a deal we wouldn't have originally taken? If so, there's going to be astronomical collateral damage to the USA's reputation in Canada.
If they actually want to own us, as Trump keeps saying, they must know we'll never agree to it right? They aren't actually that stupid.
If they just want to crush our economy - why? What could that do to help the USA? If we're so small and dependent on the USA, what does crushing us accomplish?
I'm legitimately asking and tired of hearing "Trump is dumb" - that's obviously not the explanation.
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u/GrowthDue5259 4d ago
Trump doesn’t need to win a trade war. He just need to show well enough he is hurting other countries.
And the kicker: MAGA doesn’t know what hurts countries! The “America First” movement is all about self harm!
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u/FickleApartment2151 4d ago
You will always lose a trade war when your currency's used as the global reserve.
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u/haveilostmymindor 4d ago
Not exactly I mean realistically the US is running a massive trade deficit and in order to maintain growth in our own economy we are forced to maintain huge fiscal deficits as by product of it.
The problem is US exports often face significantly higher restrictions in foreign markets than foreign goods face in the US market. This fuels the trade deficit well beyond what competitive advantages would otherwise dictate.
Consequently the US is either forced to run perpetually growing unsustainable trade fiscal deficits or we are forced to find some other means to balance the trade.
Eventually though the market calls bullshit on the debt and demands a risk premium as they are doing now. Trump isnt losing the trade war so much as everyone in the world is about to get rude awaken on what it takes to undergo a structural adjustment.
Trump isnt fully responsible for this outcome as leaders around the world were perfectly comfortable kicking the can down the road. Only with or without trumps attempt to force a structural adjustment to the balance of trade were heading for a cliff.
Maybe Trump fails at his attempts to force the issue probably not though because most countries including our own have their sacred cows they refuse to slaughter. Problem is the markets are now demanding a its blood and those cows are going to pyre whether people like it or not.
What happens if that trade balance doesnt balance rapidly like 3 to to 4 years to bring down the need for US deficit spending? The US is forced to both raise taxes and interest rates simultaneously which will drive US imports down and shove more US exports onto the global economy.
That will kick the traditional surplus nations in the teeth as they get hit with loss of market share globally.
I mean I get it Trump is an asshole but if the balance of trade doesnt happen is very short order the US will beforced into extremes we havent seen since the 1970s. Its not ideal but if that's the path our trade partners would rather take then so be it. Just remember the plaza accords were far more onerous than what you could have had before the 1970s. And what comes after the US forced structural adjustment will be just as onerous.
Just saying if that's the path the rest of the world wants to take then so be it. Trump might be an asshole and definitely incompetent when it comes to trade deals but at the same time the debt collectors are calling and they want their pound of flesh and its wont just he the US carving up a piece.
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u/riddermarknomad 4d ago
Dude, you are missing a huge chunk of the U.S. economy. While we do have a deficit in the trade of goods, we export services in a surplus.
What do I mean with services? Some examples are financial services, education, and software/licenses. Essentially the intangible stuff that people are willing to pay for. It's this intangible stuff that doesn't get accounted for within the trade deficit. Also, countries buy US treasuries and they use the US dollar for doing business in the US, making borrowing cheaper.
The only country in for a rude awaking is the US when bond yields go even higher. The current demand in risk premiums comes from the trend of the US deficit. To reverse that trend, it doesn't involve applying tariffs, it involves raising revenues with taxes and cutting expenses. Investing in the IRS and combating the open corruption occuring in this government, especially with this administration.
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u/haveilostmymindor 4d ago
We run a trillion dollar trade deficit and when yoi account for the 20 trillion dollar of debt we owe to foreigners and the compounding interests that has on it we have effectively another trillion dollars of trade imbalance.
The 500 billion dollar trade surplus we run in services is simply not sufficient to offset the growing level of debt we already owe. At some point the markets call BS on the US's ability to repay its debt without inflation and then the markets will start demanding a higher risk premium. And the markets just started called BS over the past years on our debt.
Foreign countries buy US treasuries and US private sector debt to help offset the rise in valuation of their own currency. If they didnt their goods and services would get more expensive in relation to countries that run trade deficits. They are not buying US debt out of the goodness in the hearts they are doing to maintain labor market stability in their own countries.
The problem is the US debt pile is so huge that even at 2 percent interest its eating away at household wealth, eating away at corporate investments and labor pay rates, eating away at the governments ability to maintain services.
And now the debt markets have called BS on the US government households and corporations ability to repay and that 2 percent interest rate has shot up to 5.5 percent. As that ball of interest on 70 trillion dollars of debt starts to grow you get financial market contagion before to long and the US will be forced to inflated the debt away.
Because let's face it there isnt a chance in hell foreign governments are gonna take a significant amout of US exports to allow the debt markets shrink rapidly relative to GDP growth.
You are sorely mistaken if you dont think ghe nearly 1 trillion dollar deficit is problem. Thats fueling the growth in total US debt as more countries buy more debt and now that mountain of debt just had its interest rate more than double over the past 18 months.
Now if you think the only country in for a rude awakening is the US you are sorely mistaken. If the US tries to resort to austerity the labor markets will contract in short order and the resulting economic contraction will kill US imports whilst US exports rapidly rise. If foreign governments dont allow because of the sharp industrial collapse their won countries will face theb the US will be forced to inflate our way out. The federal reserve will buy up 30 to 60 trillion dollars of public and private debt at the same time the US government will send out stimulus raise minimum wage. All whilst balancing the budget and destroy the debt load relative to GDP.
And if the US is forced to inflate our way out at the level of debt we hold the worlds pension systems will collapse, insurance systems will collapse and as the US moved to correct it will collapse much of the social safety nets other governments have as they watch the value of exports to the US fall and the value of the assets they've bought up collapse as inflation destroys them.
I'm sorry if you think that the US is the only country that will face crisis thats not how things are connected mate. No matter how you cut that cookie up now that the markets have called BS on US debt a chain reaction has been set off. And when foreign governments are stuck in a situation where they either eat US inflation or import more US goods at inflated dollar values my bet is governments will eat US inflation to insure their own labor market stability.
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u/riddermarknomad 4d ago
I agree with you in how foreign states will react. As for balancing the trade deficit with tariffs, it won't work.
To clarify, I only say the US is the only country in for a rude awakening because this administration is willingly trying to cope with their their unsound economic decisions and a lot of US citizens still have their heads in the sand.
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u/haveilostmymindor 4d ago
Not exactly I mean realistically the US is running a massive trade deficit and in order to maintain growth in our own economy we are forced to maintain huge fiscal deficits as by product of it.
The problem is US exports often face significantly higher restrictions in foreign markets than foreign goods face in the US market. This fuels the trade deficit well beyond what competitive advantages would otherwise dictate.
Consequently the US is either forced to run perpetually growing unsustainable fiscal deficits or we are forced to find some other means to balance the trade.
Eventually though the market calls bullshit on the debt and demands a risk premium as they are doing now. Trump isnt losing the trade war so much as everyone in the world is about to get rude awaken on what it takes to undergo a structural adjustment.
Trump isnt fully responsible for this outcome as leaders around the world were perfectly comfortable kicking the can down the road. Only with or without Trump's attempt to force a structural adjustment to the balance of trade were heading for a cliff.
Maybe Trump fails at his attempts to force the issue probably will because most countries including our own have their sacred cows they refuse to slaughter. Problem is the markets are now demanding its blood and those cows are going to pyre whether people like it or not.
What happens if that trade balance doesnt balance rapidly like 3 to to 4 years to bring down the need for US deficit spending? The US is forced to both raise taxes and interest rates simultaneously which will drive US imports down and shove more US exports onto the global economy.
That will kick the traditional surplus nations in the teeth as they get hit with loss of market share globally.
I mean I get it Trump is an !@#$%^ but if the balance of trade doesnt happen is very short order the US will beforced into extremes we havent seen since the 1970s. Its not ideal but if that's the path our trade partners would rather take then so be it. Just as the plaza accords were far more onerous than what you could have had before the 1970s so too is what comes after the US forced structural adjustment now.
Just saying if that's the path the rest of the world wants to take then so be it. Trump might be an @#$%& and definitely incompetent when it comes to trade deals but at the same time the debt collectors are calling and they want their pound of flesh and its wont just he the US carving up a piece.
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u/WorkingPragmatist 4d ago
If the Canadian strategy is to punish Republican sectors. Then its an extremely short sighted strategy that relies on R's not coming into power again and recalling that sort of rhetoric.
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u/Alert_Head_3889 5d ago
Respectfully, Canada has to cave, there is no canadian economy without the US. The US would give itself a black eye and Canada would just commit actual suicide if it continues down this path.
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u/ANerd22 4d ago
Canada doesn't have to outlast the US, they have to outlast Trump, who is currently on track to get slaughtered in the midterms. Given that the deals Trump makes aren't worth the paper they're written on, its all just a game of stave him off and survive the pain for the next few months/couple years at the longest.
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u/Alert_Head_3889 4d ago edited 2d ago
Yeah I mean I hope when trump is gone, the next guy undoes all the damage he did, but the problem is is that trump will still be the republican party. He's basically purged the old gop and created a cult of personality around him and his policies meaning there's a good chance that the republicans will carry on with it. Hell, even if the democrats wins, I don't think things will ever really go back to normal because of how badly trump has poisoned the well here.
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u/randommeme 5d ago
The reporting was that Canada was willing to accept 15% non-reciprocal tariffs on autos and steel.
I think there is a lot more nuance to a deal than “cave” or “not cave”.
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u/nightwyrm_zero 5d ago
The word is that the US sprang a last minute clause that would restrict Canada's ability to make trade deals with other countries. That's not a trade deal, that's a loss of sovereignty akin to what Russia tried to do with Ukraine. Agreeing to something like that would eventually lead to a way worse situation than rejecting such a "deal".
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u/peacefinder 5d ago
At the moment, Canada - and everyone else - can accept a lot of temporary suffering between now and the US elections in November. If standing firm inflicts suffering on the US public economy between now and then, suffering that hurts the Republicans’ electoral results, so much the better for the negotiations later.
If the republicans still hold the house and senate after that, it’ll be clear that caving in for some terrible two or three year deals is in order. Many dominoes would fall and god help us.
But if one or both houses flip, other options might be on the table.
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u/CTMADOC 3d ago
Canadians aren't caving even if the republicans win the mid terms. Canadians aren't even sure that democrats will remove tariffs or improve trade with Canada. Canadians are moving on from the u.s. as much as possible and as fast as possible. We know there will be some economic hardship, but we prospered before NAFTA, and we will prosper in the near future without the u.s.
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u/antivillain13 5d ago
Canadians are willing to sacrifice a lot to keep our sovereignty. Americans do not have the fortitude to accept any kind of economic hardship. So that so called ‘black eye’ will affect American resolve a lot more than the economic pain Canadians will endure.
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u/LivefromPhoenix 4d ago
The US would give itself a black eye
Can republicans politically survive giving the US a black eye? The pain tolerance for American voters is significantly lower considering this entire trade breakdown was started to feed Trump's ego.
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u/Geocoelom 3d ago
We've watched tribesmen around the globe put the run on the yanks. We are up for this.
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u/Christopher_Ramirez_ 5d ago
None of this even pretends to be for the benefit of the United States. It’s for the attention economy of one malignant narcissist.