Tuesday, April 25, 2017

Canada, really a trade war with Canada...who saw that coming?

Soft Lumber

The soft lumber thing has been going on for years -- it actually goes back to the 1980s -- so a long long time.  In 2004, the world court sided with Canada, that in fact there was no specific advantage to Canadian timber producers, nevertheless the Americans keep on feeling shortchanged and Trump (it could have been Obama too) decided to side with the American producers instead of the American consumer, and impose stiff tariffs.  Its happened before and will happen again.  Obviously, the problem right now is that many posts, in the department of exterior, remain unfilled.  It is hard to have a conversation with the appropriate level when that job has not been filed.  As it stands, so far trump has nominated 23 of more than 470 politically sensitive jobs within the US government.  That could also be part of the problem, like Mexico, Canada has no real interlocutor.

So the US is planning to impose a 20-28% duty on Canadian timber, certain that the American companies are happy as hell, their stock price went up, in terms of greater picture with the whole NAFTA can of worms getting ready to be open you got to wonder about timing -- winning a small battle to lose the war.  His next target is Canadian dairy duties that are substantial (more than 200%), and yet, Canada has a dairy deficit with the US of nearly C$ 400 MM.  

Pre electoral Trade targets

So Trump, when he was running for office, had two main target (actually more than that) but (1) Mexico that has a US$ 50 billion trade surplus with the US, and (2) China that has a US$ 200 billion trade surplus with America.  Instead Trump attacked Canada that has a US$ 50 billion trade deficit with America.  

He's now made Canada mad, and looking for payback, and there are many many ways in which this can occur, first off, Canada may look at working with Mexico -- against the interest of America, second they too can go on the offensive -- not sure that I would start with the automobile industry, but if you consider that no cars are currently assembled in Canada -- there is nothing preventing Canada from importing cars from Europe...instead of America.

Dealing with Europe and French Elections

On another matter, A few weeks ago Trump asked Merkel (a number of times) if he could do a trade agreement with Germany...yes Trump decided that the EU didn't exist.  Maybe that's why he's such a fan of LePen? Which brings to mind the French Presidential election and Macron's promises -- its hard to see how he will execute them.  France is deeply conservative and has a history of "always more".  All Frenchman love their benefits and decry the benefits of others.  There is a fundamental problem in an economy who's government has produce deficit year after year since the mid 1970.  

Impact on Canada

The tariff thing was not a surprise, and in fact the stock of major timber producers rose (the number was at the lower end of the scale).  The CAD took a hit, obviously -- further negating the impact of tariffs.  the BoC was on target to raise rates, that probably off the table now with the risk of a trade war between the two largest trading partners.  That means that the BoC's tightening agenda is off the table...again.









0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home