What is Trump's price for averting tariffs? He didn't tell Trudeau

Will Canada escape the potentially economy-crushing tariffs threatened by Donald Trump? If you can't answer that question, congratulations, you're in good company.

It's the multibillion-dollar conundrum in the minds of some of the best-connected people in North America's capitals.

Trump has threatened a 25 percent tariff on every product entering from Canada and Mexico — unless those countries make unspecified changes at their borders to slow the flow of migrants and fentanyl.

There is widespread belief in this Trump wants to make concessions that will get his presidency off to a strong start.

What is unclear: what numbers, goals or actions would satisfy him and prevent a likely recession and trade war.

Even people who know Trump, trade and Canada confess their own confusion, from people who worked in Trump's first White House to others who advised the Canadian government.

“The challenge is that Canada doesn't have a clear picture of what Team Trump really wants? What do you want resolved at the border?” Canada-US trade adviser Eric Miller told CBC News. “What does the definition of success look like?”

LOOK | 'A good conversation' with Trump:

Trudeau says he had “a good conversation” with Trump after the tariff threat

After newly elected US President Donald Trump threatened to impose a 25 percent tariff on all goods from Canada and Mexico, Prime Minister Justin Trudeau said he had a phone call with Trump in which he presented the “facts” about Canada's relationship with the US. US explained. Trudeau also said he has contacted Ontario Premier Doug Ford and that a meeting of prime ministers will take place this week.

The US president-elect did not provide any details during his telephone conversation with Prime Minister Justin Trudeau on Monday evening. Sources say the conversation started with a few minutes of friendly banter.

When they then brought up the potential irritation, Trump repeated the threat he posted on social media; Trudeau listed things Canada has already done at the border and suggested Canada's situation was not as dire as Mexico's.

Here's what's already abundantly clear: the old maxim that national security equals economic security has never been more true. The US is threatening to pull its purse strings to strengthen its own national security.

Staying inside the U.S. trade tent means seriously addressing U.S. concerns about issues like the border, defense spending and the security of supply chains, some insiders say.

Trump demonstrated this pattern during his first term by threatening Mexico with tariffs unless it controlled migration. Even a first-term Trump official recently proposed Canada deserves economic punishment if it does not increase defense spending.

Now, border security is once again at the heart of the Trump threat on trade. A senior trade official in Trump's first White House said this marks a big change.

“In the past, dealings were discussed in backrooms in Geneva. That is no longer the case. Trade used to proceed in its own way, but those lines have become increasingly blurred over the past eight to ten years,” says Everett Eissenstat. , who served as deputy director of Trump's White House National Economic Council and trade specialist during his first term.

“Part of that is President Trump; part of that is the nature of the global economy.”

Trump really believes in tariffs, and believes in using them to achieve goals that others might view as unrelated, Eissenstat said.

No 'urgency' in Ottawa

The Biden administration, for its part, used the carrot, not the stick, approach to make progress on certain issues.

Behind the scenes, there was a push for Canada to take stricter action travel rules for Mexicowhich was successfully lobbied for more defense spendingand actually gave Canada money after Ottawa reversed its approach to critical minerals; Canada gave in to a plan to let Chinese state-owned companies buy minerals used in electronics weapons.

The US now spends its own tax money, through a special scheme military fundto help get started several Canadian mineral projects.

'We shouldn't have waited for the US [defence spending] to move forward with these projects,” said Heather Exner-Pirot, energy and security advisor at the Business Council of Canada.

'There is no sense of urgency [in Ottawa].”

The business lobby group argues in a new report for increasing Canada's military capacity and mineral production with greater urgency.

Trump's re-election could fuel that urgency. But there is a long-term trend that Canada is becoming aware of, says Miller, a Canadian in Washington who advises governments and companies in both countries.

It's the growing fear from the superpower next door. It is a fear partly caused by the feeling of losing ground to a powerful new opponent, China, economically and militarily.

But as comments from Trump and his allies show, concerns about American security start closer to home, at the land borders, where millions of people have crossed illegally, including hundreds on terrorist watch lists stopped while crossing.

“Canada must adapt its thinking to a world where the United States feels vulnerable and where it doesn't always treat its allies with the spirit of cooperation that you would like,” Miller said.

So what will Trump ultimately do?

Canada can fully benefit from the result. Several estimates say Trump's tariffs, if fully implemented, could strip several points of the Canadian economy.

They could see Canada's GDP shrink by 2.4 percent, push companies to move production to the US, drive down the dollar, fuel inflation and demand urgent interest rate cuts, further hurting the dollar and inflation. will deteriorate further, according to Professor Andreas Schotter. at the Ivey Business School at Western University in London, Ont.

Eissenstat, the former Trump White House official, says this could go either way.

“It would be wise to assume the worst and prepare for the worst, but be prepared to try to make a better outcome achievable,” he said.

“These threats are real. They are a manifestation of wider trading trends and should be taken seriously.”

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If anyone can negotiate an exemption, it's Canada, Miller says.

A deal must be made if Trump actually wants one, he says, because the problems with the Canadian border are relatively minor and hardly justify the cross-border economic damage from tariffs on Canadian oil, cars and food.

“But we can't assume we're going to end up in a decent place,” Miller said. “There are people who say, 'He's negotiating. It's all nonsense.' But I don't agree with that view. I think he is someone who is completely prepared to continue this.”

And if Trump follows through? There will be lawsuits by US companies, a trade challenge by Canada and Mexico under CUSMA and talk of retaliatory tariffs, risking additional economic damage.

It's possible Trump could announce the tariffs on Day 1, Jan. 20, Miller says. After that, it could take a while before they are implemented at the border, and in the meantime there would be ongoing negotiations.

The broader story, however, would be the end of an era that dates back to the North American trade agreements and perhaps even earlier, to the 1965 Canada-U.S. Automobile Free Trade Agreement.

“We're talking about reshaping the way we've run our economies and traded for the last 30 years,” he said. “[If this happens] effectively USMCA, or CUSMA, is ready.”