Canada-U.S. trade is at an inflection point ahead of U.S. presidential election

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The Irish Eyes that once smiled on Canada-U.S. trade have been replaced by a scowl from south of the border.

Unfortunately for Canadian businesses, it seems that Washington will go on glowering no matter who wins this year’s U.S. presidential election.

Bilateral irritants, including softwood lumber and dairy, have piled up in recent years. Part of the problem is that President Joe Biden has a penchant for protectionism, much like his predecessor. (If you failed to learn that lesson from Mr. Biden’s Inflation Reduction Act, just ask ArcelorMittal Dofasco about his misguided belief that Canadian tin mill steel products hurt U.S. producers.)

Anyone who believed four years ago that having a Democrat back in the White House would translate into fewer trade tensions for Canada was mistaken.

These days as Mr. Biden gears up for the fight of his political life, he is doubling down on his Buy America policies. His trade chief, U.S. Trade Representative Katherine Tai, was blunt this month: “We are putting the ‘U.S.’ back into USTR.”

Then there’s Republican front-runner and former president Donald Trump, who is turbo-charging his “America first” mantra. His proposal to slap a 10-per-cent tariff on all imported goods, no matter the country of origin, is the talk of the primaries – and not just because he vowed to put a “ring around the collar” of the U.S. economy.

It was a strange analogy to be sure, but it is unclear if Republican candidate Nikki Haley will convince the masses that Mr. Trump’s tariff would amount to a tax on Americans.

Both men, meanwhile, appear to have disdain for the World Trade Organization. Mr. Trump hobbled it and Mr. Biden neglected it. No wonder globalization has become a dirty word in America.

For all those reasons, Canada cannot count on receiving special consideration from its largest trading partner no matter who prevails in November.

It’s enough to make Canadians nostalgic for the Shamrock Summit of 1985 when then-prime minister Brian Mulroney hosted U.S. president Ronald Reagan in Quebec City on St. Patrick’s Day.

Sure, it was cheesy to watch the two leaders of Irish descent croon When Irish Eyes are Smiling, but that moment paved the way for the Canada-U.S. free-trade agreement in 1988. (Years later, that pact was superseded by NAFTA to include Mexico.)

Sadly, Mr. Mulroney’s efforts in 2017 to charm then-president Mr. Trump by serenading him with the same song didn’t have a lasting effect. “Mr. President, I hope this doesn’t fracture Canadian-U.S. relations,” Mr. Mulroney quipped before belting out the tune.

The following year, Mr. Trump made good on his threat to rip up NAFTA and replaced it with another trilateral trade pact. Perhaps Mr. Mulroney should try again with Mr. Biden.

After all, the Three Amigos still can’t agree on the agreement’s name. Washington calls it USMCA, but Ottawa calls it CUSMA. But it’s known as T-MEC in Mexico City.

That doesn’t bode well for a coming review of the agreement in 2026.

Nearer term, the Canada-U.S. relationship faces other challenges.

Earlier this month, the U.S. Department of Commerce announced plans to raise tariffs levied against Canadian softwood lumber producers.

Dairy is also poised to be a continuing source of contention even though a trade dispute panel ruled in Canada’s favour last year.

“We continue to have serious concerns about how Canada is implementing the dairy market access commitments under the USMCA,” Ms. Tai said this month.

“We will continue to work with Canada to address this issue, but we will also not hesitate to use all available tools to enforce our trade agreements.”

In this one area, I wish the Americans luck. Canada’s dairy supply management policies are anti-competitive and inflate our grocery bills.

Ottawa, though, has other reasons to fear being left out in the cold.

Although Mr. Trump withdrew the U.S. from the Trans-Pacific Partnership, Mr. Biden has not signed on to its successor pact – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – even though the original deal was spearheaded by his former boss, president Barack Obama.

Canada is a signatory of the partnership but is still not a member of the U.S.-led Indo-Pacific Economic Framework for Prosperity, despite asking to join in 2022.

You can bet that both Mr. Biden and Mr. Trump will ramp up their respective rhetoric about shrinking the U.S. trade deficit over the coming months.

The U.S. trade deficit with Canada was roughly US$68-billion in 2023. Although that was down from US$80-billion in 2022, it is still larger than the US$32-billion recorded in 2013.

Recognizing the urgency to restore goodwill, Prime Minister Justin Trudeau urged Manitoba business leaders to remind their American clients that Canada is still important to U.S. jobs and prosperity, The Winnipeg Free Press reported on Feb. 17.

“That’s what we’re going to have to do – in thoughtful, careful ways – but in very active ways over the coming months, so that Canada doesn’t become either a controversial point in the U.S. election or a target that some people decide to go at,” Mr. Trudeau was quoted saying.

Too little, too late.