Canada needs to recognize it is ‘at war’ as tariff deadline looms: Expert

U.S. President Donald Trump’s 50 per cent tariffs on roughly $20 billion worth of Canadian goods are inching closer, with the deadline coming up on Wednesday.

The latest tariffs are a response to Canada’s provincial bans on American alcohol, quotas on certain U.S. vehicles and the supply managed dairy system.

Read more:

• U.S. trade rep says Canada must lift retaliatory measures to avoid new tariffs
• LeBlanc to meet Greer, Lutnick as clock ticks toward new U.S. tariffs
• Gas price rebound drove inflation up to 3% in July: StatCan

Lawrence Herman, a member of Carleton University’s Expert Group on Canada-U.S. Relations and a senior fellow at the C.D. Howe Institute in Toronto, joined guest host Brent Loucks on The Evan Bray Show on Monday to share his thoughts on the latest development in the trade dispute and what Canadians should be focusing on as the tariff deadline looms.

Listen to the full interview with Herman, or read the transcript below:

This transcript has been edited for length and clarity.

BRENT LOUCKS: What do you think is going to happen in the next few days?

LAWRENCE HERMAN: It’s very difficult to say. The Canadian team, a very strong, very competent Canadian team, is in Washington trying to get some kind of a deal. I, at this stage, am not terribly optimistic that we will get a deal. So much depends upon the mood of Donald Trump and whether he wants to have some kind of workable arrangement with Canada, continuing a very productive arrangement as neighbors going back well over 150 years, or whether he just wants to shake us down and hammer us. I don’t know. They’ve narrowed down the issues. They’re still very difficult issues: autos, steel, aluminum, softwood lumber and dairy. These are major issues, and it is simply uncertain at this stage. I hear what’s happening almost minute by minute in in Washington, and things are not clear, so I can’t really answer the question.

What I would say though is, because they’ve narrowed down the issues to the difficult ones and talking about numbers – I mean, when it comes to trade, you’re talking about tariff rates, that’s about numbers. Because they’ve narrowed it down to those difficult issues, what to me would make a great deal of sense would be if Donald Trump says “Well, the teams are working hard; they’re getting closer. Let’s extend the deadline for 60 days, or 30 days, or 45 days.” That would be a good outcome. Let the teams continue to try and work things out. Having this artificial deadline on Wednesday really makes no sense, but it may happen. We may have to respond, and we might have to respond with counter tariffs. In fact, I’ve been advocating that for months, but some people think that would be too draconian. I think Canada has to show that it’s prepared to stand up to a bully, and it’s going to be tough, but we’ve got to stick together.

You talk about the major issues: auto, lumber, dairy. But I’m surprised how much this whole American booze topic rises to the top. In Saskatchewan and Alberta, you can still buy American booze in in the local liquor stores. And yet, Donald Trump himself has spoken about this as well. I just don’t fully grasp why that’s such a big issue in these trade negotiations.

HERMAN: It’s an issue because it hurts some American companies that like to export their product to Canada. It’s the kind of leverage that we have, and we have to use that leverage. I’ve negotiated trade deals for many years, a long time ago, and I’ve been dealing with U.S. trade people, lawyers and government people for a long time. We have to be tough and we have to take a strong stand. We can’t roll over. And we have some cards to play – and liquor is one of those cards. Now, some deal involving the liquor problem could emerge if the U.S. backs off on their unacceptable, appalling tariffs on Canadian steel, Canadian autos, Canadian softwood lumber. So there’s the possibility of a package which could allow the provinces – the ones that still ban U.S. alcohol – to remove that ban, but it’ll depend on a whole complex of issues among the sectors that I’ve already mentioned. It’s not terribly optimistic at this stage, but who knows? Maybe things will happen in the next 24 hours, which will be crucial.

You mentioned we do have some cards that we can play if this goes bad. If these 50 per cent tariffs do come into effect later this week, if there’s no change in the other tariffs that the Trump administration has imposed on so many of our sectors, what are those options we would have? What cards could we play?

HERMAN: I think that we should be putting out a list of the countermeasures that we’re going to apply, and listing all of those sectors in the United States where we will apply tariffs if they continue on the route they’re going and put into effect these 50 per cent tariffs. Those are some of the cards we have. We also have cards in respect of critical minerals. We have options when it comes to defence matters. We don’t need to buy U.S. defence materials. We could spend money on fighter aircraft that are made in Europe; in Sweden, for example. We have cards that we can play, and one of them, I think, is in the area of critical minerals. So there are a lot of things, and I think that the prime minister and his very competent team – and I know many of the people on that team – have all of these things ready to go. I would have preferred a list coming out of the Canadian government saying “Here’s what we’re going to do if the U.S. puts on these tariffs. These are the sectors we’re going to hit.” But I want to make a point, and it’s a very important point: It’s vital that Canada stick together in dealing with the current situation. We have to recognize we’re at war. They’ve declared war. It’s a trade war, but it’s war nonetheless. We have to act accordingly. We have to be united and we have to try to downplay the political differences internally. I’m talking about what’s happening in Alberta and in Quebec and in some of the other sectors. It’s important for us in this trade war with the United States to be united and to put forward a cohesive, determined, coherent front. If we’re split, if we’re diverse in terms of our approach, if we’re not together on this, this particular administration will see that as weakness and they will exploit that weakness. So that’s a message I would give to all my friends out west and in other parts of the country.

You talked about these different sectors: lumber, dairy, auto. Could they potentially want to see those broken out as separate deals?

HERMAN: I think that we will have a separate deal. If you take my point that we’re in a war situation, what we’re talking about now is negotiating an armistice – an interim period where we lay down our arms and we try to negotiate a long-term deal. I think what could emerge, if things do come together this week, is an armistice where certain sectors are resolved temporarily and the parties then sit down and look at a much longer, permanent peace treaty. But as I said, we’re in a difficult, warlike situation, and we have to try to see what we can do.

–with files from the Canadian Press