Don’t Fear Trump’s Trade and Tax Moves, Envoys Tell Trudeau Team

  • Mulroney, MacNaughton brief cabinet U.S. relations committee
  • Canada awaiting word on Nafta talks, border tax and softwood

Justin Trudeau’s cabinet committee on U.S. relations got a reassuring message from two key envoys on the Trump administration’s approach to trade and taxes.

Canada’s ambassador to the U.S., David MacNaughton, and former Prime Minister Brian Mulroney, a friend of President Donald Trump who has acted as an intermediary, briefed government lawmakers Thursday in Ottawa. Both touted potential gains for each nation in updating the North American Free Trade Agreement, which came into force more than two decades ago. 

MacNaughton also predicted that potential harm to U.S. consumers from a Republican-proposed border adjustment tax would deter the administration from imposing one.

“I don’t think it’s going to happen because it would actually be worse for them than it would be for anyone else,” the ambassador told reporters after the cabinet committee meeting. “The evidence would suggest that a border tax would be bad for the American economy, would cost them jobs, would cost consumers a lot more money for their products.”

Trudeau has made continued smooth relations with Canada’s largest trading partner his top priority since Trump took office on threats to overhaul Nafta and put “America first” on all policy files. When the prime minister visited the president in February, Trump said the Canadian side of Nafta needs only a “tweak” compared to tougher moves for Mexico, which is also a member.

Mulroney, who signed Nafta in 1992, said the talks can be successful even if they result in significant updates. The U.S. may seek to change rules-of-origin provisions that lay out how much of a product must come from within the Nafta zone to avoid penalties, as well as the treaty’s dispute settlement mechanism, he said.

“I’m not worried,” Mulroney told reporters when asked about the talks, though he cautioned “they are going to be very challenging.”

He and MacNaughton both said Canada should be ready to make its own demands. “We don’t know what their demands are yet,” Mulroney said. “The question is what will they have to give up.”

Another key issue for Canada is softwood lumber. A previous deal expired late 2015 and a tariff freeze expired last fall. Since then, the U.S. industry has pressed for tariffs as Canadian exports surge across the border.

MacNaughton said the U.S. may reveal new duties on April 24 and that he still hopes for a settlement, again because of the potential to drive up building costs for Americans. “If they do it on the basis of fact, then I think you’ll start to see some pressure on U.S. industry to try and be reasonable, to try and settle this,” he said.

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