Canada knows Trump would win a trade fight. It is preparing to retaliate anyway.
Live MintThe leader of Canada’s energy-rich province of Alberta, Danielle Smith, met with President-elect Donald Trump and his team at Mar-a-Lago, Fla., this past weekend to try to convince them that a trade war would be bad for both countries. Retaliatory tariffs would also hurt Canadians by driving up the cost of imports from the U.S., and weakening the Canadian dollar, say economists, compounding the pain for a struggling Canadian economy that is roughly one-thirteenth the size of the U.S. “The problem is that Trump likely understands that, in a bilateral tariff war, this is gonna hurt us more than it hurts him," said Avery Shenfeld, the chief economist with Toronto-based CIBC Capital Markets. Trump has cited other factors for targeting Canada with a 25% tariff, such as the trade deficit the U.S. runs with Canada, which economists say is mostly due to the sale of Canadian energy products to the U.S. Last week, Trump said he would use “economic force" to coerce Canada in becoming the 51st state, and called the U.S.-Canada border “an artificially drawn line." Canada said its own tariffs would hurt the 36 U.S. states and the many large and small U.S. businesses that count Canada as their biggest trade partner. Smith, Alberta’s leader, said Canada could also try to mollify Trump by agreeing to let in more U.S. products, opening the door to larger imports of dairy products or electronics.