What's Going On In Canada?

I've continued to follow up on Justin Trudeau's March 4 remarks about Trump's "dumb" tariff threat, in large part because there's been so little long-form written analysis:

Speaking to reporters at a news conference on Parliament Hill, Trudeau said Trump is trying to prompt "a total collapse of the Canadian economy" because he thinks that will "make it easier to annex us," something the U.S. president has repeatedly said he wants to do.

But Trudeau said that will never happen because "when it comes to defending our great nation, there is no price we all aren't willing to pay."

Trudeau said Canada will not back down from a fight in the face of "completely bogus and completely unjustified" trade action that has the potential to ruin bilateral relations and prompt job losses, economic devastation and higher inflation on both sides of the border.

This stemmed from earlier exchanges between the two:

According to The New York Times, Trump told “Trudeau that he did not believe that the treaty that demarcates the border between the two countries was valid and that he wants to revise the boundary.” He also mentioned revisiting long-standing treaties between the U.S. and Canada regarding the sharing of lakes and rivers.

. . . Publicly, Trump wouldn’t let the matter die. In an interview broadcast before the Super Bowl, on February 9, Trump told Fox News’ Bret Baier his plans to annex Canada were a “real thing.” And to magnify Canada’s economic vulnerability, Trump told reporters that Canada was “not viable as a country” without U.S. trade.

The problem for Canada is that Trump isn’t wrong on this front. Canada is so dependent on cross-border trade that if the U.S. were to turn the screws on The Great White North it could crater Canada’s economy.

There seems to be general agreement on this point, but again, there's almost no long-form written analysis -- just YouTubers posting opinions. A piece from a few days ago at the Council on Foreign Relations gives the establishment view with little insight:

[B]eneath Trump’s unconventional way of presenting his perspective lie nuggets of truth. The grievances with Canada that the president has articulated are hardly unprecedented or unfounded. During my tenure as U.S. trade representative in the Obama administration, I saw firsthand the many persistent trade irritants in the U.S.-Canada relationship, from Canada’s subsidization of softwood lumber to its protectionist dairy policies to other policies that target large U.S. firms.

. . . Being liked isn’t everything, and Canadians are condemned by geography to be forever tied to the United States, whether they like it or not. But it certainly seems like we should be able to solve our outstanding issues with the Canadians, of all people.

A couple thousand words in between, and that's what it concludes? We really oughta work things out? Sundance at Conservative Treehouse goes a little farther into causes, but I quote him only because there's so little else available:

Trudeau said if President Trump was to make the Canadian government pay reciprocal tariffs, open the USMCA trade agreements to force reciprocity, and/or balance economic relations on non-tariff issues, then Canada would collapse and cease to exist.

In essence, Canada cannot survive as a free and independent north American nation, without receiving all the one-way benefits from the U.S. economy. To wit, President Trump then said, if Canada cannot survive in a balanced rules environment, including putting together their own military and defenses (which it cannot), then Canada should become the 51st U.S state.

. . . The only way for Canada to be a sovereign nation unattached to the United States, is if they drop all of their climate-change initiatives, drop their liberal economic rules and regulations, begin a system of heavy industry production again and get back to using cheap energy production as the fuel to drive it.

Canada would then need to discontinue most social welfare programs and instead divert that money to their military budget.

This morning, he gamed out the impact of the tariff war:

Here’s how it will happen. CAD = Canadian Dollar, USD = U.S Dollar

President Trump hits Canada with an approximately 50% tariff. Let’s say an import widget from Canada costs the purchaser/importer $100 CAD + 50% tariff, now $150 CAD.

$1 CAD = 0.70¢ USD

Without U.S. tariff, it costs $70 USD to purchase the $100 CAD widget.

With the U.S tariff it would take $105 USD to purchase $150 Canadian widget

However, due to economic policy, Canada’s dependence on the USA market and the tariff battle, the Canadian currency drops around 30%. $1 CAD now equals 0.50¢ USD

With currency drop it now costs $50 USD to purchase the original $100 Canadian widget. $75 USD with tariff.

BEFORE: $70 USD without U.S. tariff, or AFTER: $75 USD with 50% U.S. tariff. A net change of $5.

But wait, back to Mark Carney’s plan. As stated in his tariff policy, the prime minister will take income from the Canadian side of the tariff equation (countervailing duties) to subsidize the impacted export sector. . . . All of this is done to retain access to USA consumers.

The final outcome, the U.S. purchaser is back to the original price of $70, only now that same outcome is evident with an invisible $50 tariff.

This is what Canada is now planning to do to retain access to the U.S. market while they look for alternatives.

What are the alternatives?

Prime Minister Carney outlined yesterday how he will increase the industrial carbon tax in order to align with U.K and EU trade partners on the issue of climate change. Taxing carbon, he says, is the key to unlocking excellent trade agreements with other ‘global trade partners’ who can then fill the void created by disconnecting Canada from the USA economy.

This is in line with Chrystia Freeland's idea of building a separate alliance with the UK and France as nuclear powers to balance the US. This is all nothing more than grandiose fantasy that solves nothing -- Canada, France, and the UK together would be litte more effective than Canada alone against the US, especially as none would seriously increase its military budget.

Maybe Trump has a point. But it's so strange that there's so little long-form analysis of these issues. If the only practical solution to the Canada question is to absorb it into the US, peope need to start seriously thinking about how this would be done.