Evan Bray Show panel breaks down impacts of trade war with U.S., China

Tariffs from the United States and China could have a big impact in Saskatchewan and across Canada.

But with U.S. President Donald Trump frequently changing his mind and Chinese tariffs on canola, pork and other food commodities coming as a surprise to many, there are still a number of unanswered questions about what the international trade disputes mean for the average Canadian.

Read More:

• U.S. commerce secretary says steel and aluminum tariffs coming this week
• Scott Moe says Sask. canola put in the line of fire by Chinese tariffs
• What do Trump’s tariffs mean for you?

To help answer some of those questions, Dr. Sylvain Charlebois, a professor studying food distribution and policy at the Dalhousie University Agri-Food Analytics Lab, along with Ian Lee, an association professor of business at Carleton University, and Jason Childs, a professor of economics at the University of Regina, joined the Evan Bray Show on Monday.

The panel discussed some of the big unknowns around tariffs, and took questions from listeners to help shed some light on a very murky and rapidly changing situation.

Listen to the panel discussion here, or read the transcript below:

The following questions and answers have been edited for length and clarity.

BRAY: I want to ask you a question that’s been asked many times of many people, but I want to give you a chance to talk about what you see as Donald Trump’s ultimate, ultimate motive with his use of tariffs. Is it in line with how tariffs have traditionally been used?

LEE: I have to give you a nuanced answer and say yes and no. Let me back up. Tariffs have been around for a long, long time – I’m sure my colleagues will even talk about that. I think they go back to a probably ancient Roman times, but we’re not here to talk about ancient history. I want to jump to the article that I wrote an op ed on in the National Post about two weeks ago, and it was (about) a paper written by Stephen Miran. People may have never heard of him, but he has PhD in economics from Harvard. More importantly, or equally importantly, he worked in the first Trump administration in the Treasury Department, which is their finance ministry. And he wrote this paper. It’s 41 pages. To my knowledge, is the only paper has been published by anybody who is very, very close to Donald Trump. In fact, this guy has been appointed as the chief economist of the White House. Technical title is the chair of the Council of Economic Advisers, and he, in this 41 page paper – and I’m not saying I agree with his plan at all; in fact, I don’t agree with it because I don’t agree with tariffs – but he spelled out this vision, and I think he’s Donald Trump’s brain, and he said, basically, “We are going to use tariffs to force countries around the world that are preventing American companies from going into their economies – in some parts of their economy – we are going to use tariffs to force those countries to open up their economies and get rid of a protectionism against American companies.” This is not me talking. This is Stephen Miran talking, who’s now the chief economist of Donald Trump. And the title of the paper gives it away. The title is how to reform, or how we’re going to guide to reforming, the international economic and trading system.

So those Canadians – and there’s many, including leadership in Ottawa, which I find so depressing – who are saying Trump is an idiot. He’s a moron. He doesn’t have a clue. He doesn’t have any vision, he doesn’t know what he’s doing. He’s just shooting from the hip every day. I’m not here to defend Donald Trump, but I want to do a quick metaphor that that everybody understands. I have enormous respect for Tom Brady – seven Super Bowl rings. I never once heard Tom Brady ever go to the Super Bowl and say “Look, the other team we’re competing against, they’re just a bunch of bozos. They don’t know how to catch the football, they don’t know how to run. We’re not going to study the other guys. We’re not going to figure out what they’re up to, because they don’t know what they’re doing. We’re just going to go and get drunk every night and party and then go and play the Super Bowl.” Brady never did that. He was famous for saying “I’m going to study the other guy and figure out what they’re up to.” Our leadership in Ottawa is not doing that. They’re running around saying “Trump has no plan, no vision.” They didn’t even read this paper. In fact, I didn’t know anyone in Ottawa who was aware of this paper by Stephen Miran until it was I did the op ed in the National Post and, fortunately, some other people started talking about this paper by Miran.

So I want to be very clear: I’m not advocating what Donald Trump is saying. I believe he does have a plan. I believe it’s audacious, it’s radical, and it’s frightening for us as Canadians, but he has a plan, and he wants to use tariffs to force us to do things that we’re not doing. A digital service tax – he wants it killed. He wants the border tightened up. He wants to spend more on defense, and he wants us to open up those protected industries: supply management, telecom and so forth. So they have a plan. It’s a scary plan, but they do have a plan. There’s a method to his madness.

Jason Childs, I’ll come to you next. Thoughts on the Saskatchewan government approach with regard to these tariffs. So each province is kind of taking a different swipe at this. Thoughts on what you’ve seen from our province?

CHILDS: I think it’s as close to correct as you can be in this kind of environment. Small, trading economies, when you get into a trade war with somebody who’s much, much bigger that you’re dependent on, the best response, from an economic standpoint, is no response. Don’t do anything. Don’t react. Just get on with your life. And you know, politically, that’s not going to fly. Emotionally, that’s not going to fly either, so you have to do something. And this is, you know, this isn’t going to radically alter our world. We’re not talking about export tariffs on potash or oil or anything like that. We’re taking a minimalist response, and I think that’s the correct response to take. I mean, that’s what all the economic modeling from the Bank of Canada through Montreal Institute and others show. It’s always a bigger impact on us when we retaliate.

What do you think is important for government to keep in mind when it comes to these issues about tariffs and what we’re going to do, given the emotion that’s behind this?

CHILDS: It’s really important, I think, to remember emotion runs hot and fast, and you can and you can put yourself in a really negative position if you act too strongly on emotion quickly. In other formats and forums I’ve been counseling slow, deliberate, thoughtful. Imagine you’re in an argument with someone, and you feel yourself losing your temper. You need to extract yourself and slow things down and really think, because you can say and do things in that moment that are really damaging for the long term. And you know whether or not Miran is correct… it’s really important to remember that no matter the changes Trump makes, he’s not here forever, and the U.S. is going to remain the largest economy in the world and the most productive economy in the world for the foreseeable future. Cutting ourselves off from that in a permanent fashion is probably bad strategy.

Sylvain, a number of the texts that are coming in are saying “What is this whole 250 per cent tariff Trump is throwing up? Have we really been the bad guy when it comes to dairy and lumber in Canada?” Can you start this conversation for us and get us into maybe a bit of a supply management 101?

CHARLEBOIS: Absolutely. It’s funny when I when I hear Howard Lutnick, (U.S.) secretary of commerce, saying that we’ve been mistreating U.S. farmers, well, the reality is that we haven’t really treated them at all. I mean, it’s like the U.S. doesn’t exist, really. Supply management is a highly protectionist food security policy, so we have quotas. So provinces manage quotas, and this is why it’s so political. So you can understand, Evan, why politicians don’t want touch supply management. So you got quotas, but you also have tariffs on imports to protect our our industry, and of course, making sure that farmers get a fair price. And that fair price is calculated by the Canadian Dairy Commission in Ottawa, where Ian is, and so that’s basically how supply management works. So you need tariffs on imports to protect the industry, but over time, this policy has become incredibly criticized and unpopular, because we’ve seen many countries with supply management getting rid of the system, like New Zealand, Australia, the UK, Europe, Korea – I can name you a bunch of countries which have actually decided to move away from supply management, because it basically forces an industry to go into a spiral, a declining spiral, and that’s what we’re seeing in Canada. But yes, absolutely, a 250 per cent tariff is absolutely true. Butter, for example, if you’re an American manufacturer going into Canada, you have to pay a 298 per cent tariff, and that’s why most of the butter we eat in Canada is purely Canadian.

LEE: This policy was set up by the Pierre Trudeau government in 1971 to, quote, protect dairy farmers. There were over 150,000 dairy farmers in 1971 – I just looked it up. Today, there’s 9,400 dairy farmers across all Canada, mostly in Ontario and Quebec, by the way. So this is benefiting them, basically Ontario and Quebec. But the point is, for number one, it was a catastrophic failure. It didn’t protect the dairy farms. I’m not trying to say that the supply management caused the number of farms to decline from 150,000 to 9,400, but they certainly can’t say it saved it. But much more importantly, this policy milks, plucks, exploits and discriminates against ordinary Canadians by doubling the price of dairy and poultry. This is outrageous. All these people that say “We’re for social justice! We want to make life more affordable for Canadians,” this policy expressly makes life more unaffordable for Canadians. It is the exploitation of millions of ordinary Canadians by about 9,000 multi-millionaire dairy farmers, because they’re all multi millionaires, according to StatsCan data.

CHARLEBOIS: Ian makes some really, really important points here. True, supply managers did not save anything. We’re losing farms; we’re not gaining farms. We didn’t save anything. The only correction, if I may, Ian, it’s in relation to retail prices. So the difference between our regime and America is that their system allows for retail prices to fluctuate way more than ours. Ours are more stable, but the biggest strategy when it comes to supply management is industrial milk. All of these companies, when they paid for their milk – and they have to, by law; that’s supply management – they’re paying three times the price that American manufacturers are paying. In other words, we’re killing innovation. We’re killing growth, and that’s why their sector is shrinking, not growing.

How much would a 250 per cent tariff put in place by Donald Trump impact us?

CHARLEBOIS: Right now, we’re exporting maybe $250 million worth of dairy products to the U.S., but most of these products are specialty products and, frankly, we’re not competitive at all. So these products are bought at a premium. It’s very expensive to buy dairy products, and I’m sure many of listeners would have noticed that cheese is expensive in Canada, and that’s why it’s the industrial milk killing manufacturers – their input costs are through the roof. So American buyers, there are some of them, but they don’t buy a whole lot. So a tariff on Canadian imports into the U.S. wouldn’t make much of a difference. But what I saw from Lutnick and Trump last week was a clear message that things have to change, and that’s why I’ve always said to the dairy sector in Canada, “Either you change now, or someone else outside of Canada will force you to change,” and that person’s name is probably Donald Trump.

There are a number of texts that are coming in. There is one here wanting to know, essentially, if we could comment on the interprovincial tariffs in Canada, and if that is dealt with, does that ease the pain?

CHILDS: It’ll help, absolutely. It’ll make us less dependent on the American market if we can have our provincial economies actually trade with each other in something resembling a free manner. Some estimates say it’s about four per cent of GDP we lose, but a lot of that’s on the labour side, and labour and mobility, but supply management factors into that as well. And there’s some pretty big barriers that look like supply management in terms of teaching or in terms of legal practice. You have to be licensed (in the) teaching practice. You have to be licensed in each specific province. You can’t just pick up and move. Or there’s some testing and certification, Red Seal, like trades. You have different standards in different provinces, and everybody’s favourite province doesn’t let in others.

Ian, I’m going to let you start on this one. Glenn says “I’m just wondering if one of the guests could comment on how drastically the tariffs might affect pension plans. Is it a major concern or a minor problem?”

LEE: I think it’s a major concern, and I’ll explain why. I am completely and totally opposed to retaliatory tariffs. One interview, I said it’s as dumb as a bag of nails, because retaliatory tariffs are imposed by our government, the Canadian government, on 40 million Canadians. Retaliatory tariffs are not on Donald Trump and the Americans. Roughly they’re talking upwards of $200 billion. If they’re imposed, that’s a $200 billion tax increase on Canadians. That’s going to make our life less affordable. More importantly, as (Bank of Canada) governor (Tiff) Macklem stated in that excellent speech he gave last week when he reviewed the impact of these tariffs, they’re not like the pandemic, which was cyclical, sent everybody home, (we) helped everybody out, everybody goes back to work, we recover. This is a permanent structural decline in our standard living: retaliatory tariffs. If it drives down the overall prosperity in the Canadian economy, of course that’s going to affect all of the companies in the economy, and the investments held by pension plans in those companies across the Canadian economy.

If we drive down our prosperity, drive down our standard of living, drive down the GDP growth rate, drive down the GDP per capita of the country, the totality the economy starts to shrink because of these terrible retaliatory tariffs, which is nothing other than cutting off our nose to spite our face, thinking we’re fighting Donald Trump’s face when we’re not, then this is going to feed back slowly, for sure. It won’t happen tomorrow morning, but it will feed back in the rate of returns of our pension plans across Canada.

CHILDS: As we move to more and more protectionism, protectionism is associated with slower growth. So not only are we going to see the damage from the tariffs and the lower standard of living – and it’s really important to remember that the Canadian per-capita GDP is at what it was roughly in 2019 so we’ve had no growth in per capita GDP in six years, and now we’re looking at taking another action that’s going to drive that even lower – that’s that’s going to hurt your pension, and it’s going to hurt affordability across the board. Unless you’re one of those really lucky people with a defined-benefit pension plan where your employer, whoever it may be, is on the hook, and that’s who’s not going to suffer from a decline in the values or assets. We’re also likely to see a shift in investment patterns. We’ve seen an uptick in risk, and we’ve seen, potentially, we’re losing preferential access to the largest market in the world. And why would you invest on the Canadian side of the border in that environment? We need to get this sorted out, and yesterday.

CHARLEBOIS: Great comments from both Jason and Ian, but I gotta say, I mean all three of us, we talk to media, we get emails from Canadians. I honestly feel that the Trudeau years has made Canada much more economically illiterate. And I mean that, and I thought many weeks ago that people understood what counter tariffs meant, but we have to be explicit about it. We have to explain to people, as Jason and Ian just said, it will impact our quality of life. It will make our country poor. We have to explain that to people.

What about this notion of putting a tax on exports to the States? So Doug Ford, his his tax on electricity to New York, Michigan and Minnesota, is that a good thing, Ian?

LEE: I don’t think so. I want to hear Jason, because he is the economist here, and he can get into this sort of the technical details of why it doesn’t work either. There’s been very good studies over the years by economists and strategy people, when a business or an industry goes through a cataclysmic interruption and their production was interrupted not because of their own choice, just because of this terrible disaster, whatever it was. When you lose your customers, or you lose some of your customers, it’s really tough to get them back. Why? When they can no longer buy from you, they go and find alternative sources of supply, because they don’t stop functioning as customers that are buying, as businesses that are buying your product as inputs. So they go look for alternatives, and once you’re happy with the alternative, you don’t return. And so when you start alienating deliberately, like Doug Ford is, well those people in the States, those companies in the States buying that electricity, or it could be oil, are going to go and find alternatives, and they’re going to say “You know, those guys that just cut us off aren’t reliable. They’re not trustworthy.” And business needs trust. They need reliable supply chains. So if you’re going to cut off your oil from Canada to the States, or natural gas or electricity, they will go seek out alternative suppliers, and you will not get those customers. A good chunk will not return to you. So that again, is cutting off your nose to spite your face.

Jason, I want to come to you with the same question. What Doug Ford is doing, which is charging a tax, charging whatever you call it, on the consumers down in the States, (it’s) not directed at Canada?

CHILDS: It’s an export tariff. We have no ability to directly levy tariffs on Americans. We tax it as it leaves, right? Instead of when stuff comes in from the U.S. that gets taxed, it gets taxed by us, instead of the Americans. And that’ll do a couple of things. One, it’ll raise the price for the Americans, depending on the commodity. It means a reduction in demand and reduction in price here, so it means less employment all that kind of stuff here. And just like Ian said, it forces them to find other suppliers. Now, there are some commodities we could talk about, and I know Sylvain might be itching to talk on this one. One place where we might have a bit more leverage is potash, but we’ve already seen the Americans start to talk to Argentina about setting up a new potash mine. There are some deposits there that are undeveloped or underdeveloped. So again, that whole idea of going and finding it somewhere else comes into play. And once you lose that customer, it’s really hard to get back. So Doug Ford is probably going to spur a bunch of generation capacity construction in the U.S. And that’s going to take away from Ontario’s ability to sell into that market. And Ontario already has some of the highest electricity rates in the country, and what happens if they lose that export market? Well, that generating capacity has to be maintained by the Ontario customer.

LEE: I’m not a conspiracy theorist, but I think the Laurentian elites are trying to change the subject to all manifestations of retaliation, retaliatory tariffs, export terrorists and so forth, to change the subject from what we really ought to be doing, which is elimination of provincial trade barriers (and) elimination of protected industries. What they’re doing is changing the subject from what we ought to be doing to respond to Donald Trump, to all these silly things that we ought not to be doing because they’re harmful.

Potash is something that obviously is pretty important in Saskatchewan. Have we lost a little bit of ground there, given the fact that the U.S. seems to be snuggling up to Russia, where there are potash deposits where they could access?

CHARLEBOIS: Absolutely. I know that both Jason and Ian feel strongly about not taxing exports, but I actually feel that it’s important to respond to to Americans right now, to send them a clear message. I don’t think that counter tariffs are the way to go, but when it comes to potash, I mean, they buy about $7 billion worth of potash every year in the United States, coming from Canada. And right now, American producers are desperate to get cheap inputs due to depressed commodity prices. And so right now we would get their attention. And, of course, every time you make your product less attractive, countries will look for options. Of course we should expect that, but in Saskatchewan we can regulate our production. We can actually build inventories and basically remain flexible, depending on on how Americans respond. But I do think that potash, especially when it comes to the agri-food sector, I would say that potash is really on top of the list when it comes to perhaps “weaponizing” our strategic exports to the U.S .and get their attention, because when it comes to a trade war, Canada won’t do much, but you do want to shake things up a little bit.

LEE: This is one time I really strongly disagree. I think that the Laurentian elites, if I can say that the Government about Canada and Ottawa have have really put something over on all of us in Canada, they’ve changed the conversation, too. There’s only one solution: some variation of tariffs on Americans, except that they’re on Canadians. They are changing the channel, changing the subject from the numerous things we must do and ought to do that they, I believe, are opposed to. How about diversifying our markets through LNG exports to Asia and to Germany, that are begging for it? How about the elimination of interprovincial trade barriers? How about the elimination of protected industries? There are many things that we can do to address our response to Donald Trump, not tariffs, but the list is in that speech by Carolyn Rogers. Time to break the glass, but the Laurentian elites called the Government of Canada don’t want to break the glass. They don’t want to diversify our exports. That’s why they’re changing the channel to getting us talking only about tariffs, which are the worst possible solution.

Jason Childs, final thoughts?

CHILDS: With K+S and BHP, they’re not using Canpotex, so they’re exporting on their own, so we have less control than we once did, at least as I understand it. The other thing to keep in mind here with the potential for an export tariff on potash, Saskatchewan really just got hit by Chinese tariffs. The Chinese tariffs aren’t going to do a blessed thing to Ontario or Quebec, but those counter tariffs are, in response. They’re counter tariffs, and they’re in response to Canadian tariffs on EVs. And those Canadian tariffs on EVs were put in place to defend the federal government’s subsidy of battery plants in Ontario and Quebec. So we’ve got to be really careful here. There’s a really strong opportunity for this thing to end up being a wedge issue. Now, if we were talking about some sort of back fill for Saskatchewan royalties and employment and that kind of stuff from other regions, it might be a different conversation. But right now, actions taken by the federal government of Canada that favour Ontario and Quebec are coming back to bite Saskatchewan.

One minute left. Sylvain, final thoughts?

CHARLEBOIS: I’ll tackle the interprovincial trade barrier issue. As Ian said, absolutely, it’s a must. Should be a priority for all. It’s about time we actually tackle these issues. And of course, last week we just saw all premiers, going after the low-hanging fruit, eliminating most barriers. But they’re excluding food, and we all know why. We all know why: because of provincial marketing boards that hold quotas – government-sanctioned quotas – and that was a missed opportunity, as far as I’m concerned, because if you eliminate interprovincial trade barriers when it comes to agri-food, you would actually help Canadians, all Canadians, save anywhere from $250 to $300 a year at the grocery store.