The coming trade war with Canada, Mexico, and Europe - Tim Büthe op ed

Monday, June 11, 2018
The coming trade war with Canada, Mexico, and Europe - Tim Büthe op ed

What do apples, bourbon, pork, cranberries, and orange juice have in common with designer blue jeans, Harley-Davidsons, beer kegs, lamps, and washing machines? They’re all profitably exported to Canada, the European Union, and Mexico from U.S. districts and states where Republicans must win in November to keep their majority in the House and the Senate.

They are also subject to “punitive” tariffs imposed (or about to be imposed) by these countries in retaliation against the 10 percent and 25 percent tariffs the Trump administration imposed, effective June 1, on U.S. aluminum and steel imports from these allies.

Swift retaliation has been politically controversial within Canada, Europe, and Mexico and therefore was far from certain. Some trade policy experts advocated handing Trump some negotiated “victory” on steel and aluminum in the hopes that it would appease him. Others encouraged waiting for a decision from the World Trade Organization (WTO), which is expected to rule that the U.S. tariffs violate the largely U.S.-written international trade law, and then formally authorize punitive measures.

Retaliatory tariffs are also economically controversial. Imposing them on U.S. goods makes the goods more expensive to Canadian, European, and Mexican consumers. And many of those goods aren’t made in these countries, so there is no protectionist benefit. Worse, retaliation may prompt counter-retaliation by the easily angered president and thus trigger a full-blown trade war.

So why are the Canadian, European, and Mexican governments unified in pursuing retaliation that is economically harmful and politically risky?

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