Opinion: Time to lower our elbows and make a deal

Mark Carney strikes a fighter's pose at a 2025 campaign rally. Janice MacKinnon and Jack Mintz write that it's time for Canada to get back to the table to negotiate a new trade agreement with the U.S. Photo by John Mahoney / Postmedia

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Canada’s “elbows-up” approach to American tariffs has been unique among market-based economies. What have the EU, Japan, South Korea, U.K. and especially Mexico done differently and what lessons might we learn from them? Mexico has recently announced it wants to complete trade negotiations with the U.S. before the November midterms. That would leave Canada as a jilted bride.

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The prime minister and the country obviously had a difficult hand to play in dealing with President Donald Trump — erratic, unreliable, crude and rude — and his clear desire to make Canada the 51st state rightfully angered Canadians.

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But the strategy of going along with the U.S. on border security and defence but being “elbows up” with retaliatory tariffs, boycotts of liquor and travel to the U.S., and overtures to China has escalated the conflict. In the most recent negotiations, Canada could have simply explained why the deal the Americans were offering was unacceptable and expressed a willingness to continue negotiations. Instead, we unilaterally ended the negotiations and declared a trade war with the U.S. Batten down the hatches!

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Canada’s position, heavily influenced by experience with the past CUSMA negotiations, has been “no deal is better than a bad deal,” with the implicit assumption that a better deal could be reached by delaying until there is a change in leadership in the United States.

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The delaying tactic of refusing to renegotiate CUSMA until the current American tariffs are addressed has clearly failed. It has led to a further round of American tariffs and produced a rift with Mexico, which has been clear and consistent on its intent to negotiate and sign a trade deal with the United States.

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The other dimension of Canada’s strategy has been to diversify its trade and encourage more investment in Canada. Diversification makes sense to a degree, but it will be nearly impossible to replace the large, dynamic U.S. market with more distant markets where we won’t be competitive. Though the prime minister has acknowledged that his professed trade war comes at a cost, he also needs to acknowledge the costs associated with diversification.

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The EU, Japan, the U.K., South Korea and others have negotiated deals with the U.S. that included tariff hikes they didn’t like but at least brought stability and predictability — to the extent those are on offer by the current administration.

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For its part, Mexico has taken a low-keyed approach, stating its positions clearly and concisely but avoiding escalation in actions or rhetoric. Mexico has also addressed American concerns about China by enhancing screening of Chinese investments and placing tariffs of between 35 and 50 per cent on more than 1,000 Chinese items, including steel and electric vehicles, to curb trans-shipment of Chinese products through Mexico. Unlike Canada, it has not imposed retaliatory tariffs, it is renegotiating CUSMA with the U.S. without Canada, and its president is optimistic about signing a deal with Americans. As a result, Mexico was not hit by the new U.S. tariffs Canada has had to bear since February. It’s no accident that Mexico’s trade with the U.S. increased by six per cent last year, while Canada’s slipped seven per cent, with an even larger drop in the auto sector.