[#-3]

Originally Posted by Strange Brew

I do believe his real intentions are to reduce the US trade deficit.

Spoiler!

I listened to a speech about three weeks ago from a guy that was formerly chief of staff for McConnell and still works in DC. He stated that there was widespread consensus on both sides of the aisle that globalisation has not been an overall positive for the average American worker. And so there is this general sentiment to bring jobs back to the US. Which is hard for me to really understand since the unemployment rate is so low. People have jobs. But that's what he said.

Anyway tariffs would at some point bring some jobs back, but not to the overall benefit of the economy or the average American IMO.

But for the sake or argument let's say that tariffs in the long run would help America (not my view). Trump does not have the discipline to follow through on a policy that would cause such short term pain and economic disruption. He does not have the spine for it. At the heart of it, he is a populist, self interested politician who does not stand on principle.

Which is why today's result was relatively predictable.

He will rattle his sabre. Make threats and take some actions to be sure but long term conviction is not his thing. So Canadian and Mexican leaders just need to tread carefully and play the game wisely.

I think this is 100% accurate, because he doesn't really understand what a trade deficit is (which is actually a pretty common problem). Because globally the US exports so many services (media, IP, social media, ERPs, consulting...) they are functionally able to consume more goods than they produce, therefor trade deficit. The assumption he is making, is that they can produce what they consume, and export those services, but if other countries don't have stable economies, where are they going to export those services? So the policy is explicitly to reduce the number of accountants and engineers in favor of having more cherry pickers and automobile assemblers.

I think the long game for Canada is to somehow get Trump to understand that Canada actually has a functional trade deficit with the US, the commodities they buy from us they upgrade and re-sell for a profit, if you remove those commodities we actually have a rather large deficit on consumer goods, and if you start to add in services we have a huge deficit. There are 2 real risks here in losing Canada as a market for consumer goods, and losing access to supply of raw material on things that they do manufacture and profit from. Both of those things are good for the US, separate from weather they are good for Canada or not.

*I do appreciate that anything that takes more than 1 sentence to explain is a heavy lift to get Trump to understand, but that is the market position that Canada is in.