Make America Crash Again: Trump, Economics, and Security

12 June 2018 – London, UK

by Chris Murray

In recent months the United States, with its population of 325 Million and GDP of $18.5 trillion has taken an aggressive and escalating approach to trade negotiations globally. In the milieu of this growing rhetoric, the US government has identified a rather surprising target to focus a particularly coarse strain of ire upon. Canada, with its population of 36 million and GDP of $1.5 trillion, is the United States second largest trading partner as well as their closest military ally. In recent weeks President Trump has become increasingly hostile towards this incredibly beneficial and largely one-sided (In America’s favour) relationship over what are non-existent trade imbalances. President Trump has presented admittedly made up trade imbalances that simply do not exist in the US-Canadian relationship for reasons that are beyond comprehension and that can only serve to significantly damage the US economy.

The central point of contention in this growing debate is Canadian steel and aluminium exports to the United States, which President Trump recently announced, will now face 25% and 10% tariffs respectively. Canadian steel and aluminium make up a significant portion of what US industry relies upon. The US imports nearly 90% of the aluminium it uses and nearly half of that comes from Canada. It’s projected that this could cost the Canadian economy, which exports nearly 85% of its steel and aluminium to the US, an estimated $3.2 billion a year and well in excess of 100,000 jobs. Worse still it is expected that the new US tariffs on Canadian steel and aluminium won’t help the US economy at all but actually hurt it even more than Canada. In response to these actions, Canada has responded with dollar-for-dollar retaliatory tariffs scheduled to take effect 1 July. This represents a significant economic problem for the US with Canada representing the largest market for the exports of 36 sates. As a result, almost every US industry (with the obvious exception of US Steel and Aluminum producers) are vehemently opposed to the tariffs. This has left most to wonder, why is President Trump doing this?

President Trump’s argument is a simple one; it’s also, quite frankly, appallingly stupid. That argument is that the US reliance on Canadian steel and Aluminum represents a national security threat. This is no doubt motivated by the fact it is one of the few reasons the President can present that won’t run afoul of both US and international law. That said, it’s complete nonsense. Canada’s Minister of Defence, Harjit Sajjan, who has served alongside US forces in Afghanistan, described it as “literally absurd.” To begin with, this

Secretary of Defense Jim Mattis meets with Canada’s Defense Minister Harjit Sajjan at the NATO Headquarters in Brussels, Belgium.

view requires a much broader interpretation of ‘national security’ than has ever been utilized historically by the US in this regard. It is furthermore based on the ludicrous premise that in time of war that Canada, a NATO ally at the very least, would not simply be unwilling to come to the aid of the US but would cut off the supply of these vital resources. This ignores the reality that Canada is deeply committed to US defence and would without question be, as it always has been, right beside the US in any conflict imagined within this scenario. To understand the nature of US-Canada relations on the issue of defence presenting the following will help to underscore the nature of the relationship. Canadian airports currently handle 80% of US commercial airlines overseas pre-clearance. US Customs and Border protection units operate on Canadian soil, permanently embedded directly in Canada’s six largest airports. US-Canadian law enforcement operate integrated law enforcement and customs teams in 15 different regions along the 8,800km border where they monitor the 400,000 people and $2 billion in goods and services that cross the border every day. Essentially any threat to one country is a threat to the other and the two have successfully worked from this premise for nearly a century. President Trump, however, seems more concerned that ‘Canada burnt down the White House’ during the war of 1812.

As recently as the war in Afghanistan, Canadians have commanded US troops in battle. Canadians routinely hold senior positions to US military personnel with direct command over them. A Canadian currently serves as deputy commander of NORAD. All of this is routine. Indeed, for those outside of the US and Canadian military, it is hard to fully appreciate the level of integration which exists between these two nations’ forces. This is a relationship unlike any other in the world. The idea that ‘Canada’ and ‘national security risk’ ever be used in the same conversation inside of American political discourse is, as

Donald Trump and Kim Jong-un talking in Capella Hotel, during the Singapore summit

Canadian Prime Minister Justin Trudeau quite rightly described it, “quite frankly insulting and unacceptable.” This rhetoric, it should be pointed out, comes at the same time President Trump is meeting with Kim Jong-un in Singapore and arguing that Russia be reinstated in the G7/8 meetings.

This underscores a reality that Americans seem unwilling to accept, President Trump’s term in office has been magnificently damaging to the US at home and abroad. The course he has set, without question, assures US isolation, economic downturn, and increased security risks. Many continue to argue that President Trump’s approach has been hugely successful. This seems hard to understand when internationally President Trump’s tough talk has emboldened Putin, given Duterte a free had, celebrated Erdoğan, praised Chinese authoritarianism while surrendering global leadership to China along the way, weakened America’s hand against Iran, caused Europe to essentially abandon all hope regarding the US, and increased the likelihood of conflict in the Middle East.

Domestically President Trump’s approach is lauded with many pointing to the stock market as an indicator of his economic success but it’s a flimsy argument. Trump has been riding an upward trend that started long before he took office. The market has been trending upwards for several years. This has largely been the result, like it or not, of Obama era economic policies. Upon President Trump taking office, the Markets responded positively as traders and investors speculated that a Trump Presidency would be good for the economy. Despite remaining high, thanks to the aforementioned policies, the honeymoon is over and we’re already getting a glimpse into the future of a Trump America. The market is beginning to trend downwards. Each time the President tweets some new ill-informed idea aimed at his Fox news base the markets have taken a hit. Examples being, Trump’s attack on Amazon at the beginning of April, which not only crashed Amazon stock but the Nasdaq with it. Another being a week later when Trump taunted Russia via twitter resulting in the Dow closing more than 200 points down. The imposition of tariffs, the taunting of allies and trade partners, and the President’s eagerness to start a trade war with anyone and everyone willing has already begun to cause concern if not panic for the future.

The president hopes that through the imposition of tariffs and similar measures he can shrink the US trade deficit by encouraging America ‘first buying.’ This he believes is the only course to strengthening the US economy, currently the largest in the world. The reality is that these policies will do the reverse. We have already seen the result of

U.S. Secretary of State John Kerry addresses delegates before he signed the COP21 Climate Change Agreement on Earth Day, April 22, 2016, at the United Nations General Assembly Hall in New York, N.Y.

President Trump’s missteps. For example, exiting the Paris Climate deal is estimated not to save but cost the US Economy trillions of dollars. Likewise, President Trump’s tariff on solar panels has led U.S. renewable energy companies to cancel or freeze investments of more than $2.5 billion.

As far as the US’ current trade deficit, instead of shrinking it through greater domestic sourcing President Trump will see US exports drop as a result of retaliatory tariffs on US products. To compound the problem, the manufacture of domestically made products will be moved offshore in response to the increasing cost of materials associated with production. Therefore domestically made products will turn into imported products. The products will cost more, thanks to tariffs, and be less obtainable due to the massive unemployment they leave in their wake. Essentially the president is pursuing a course that will ensure the very opposite result from the one he is aiming for. The downside to all this is causing even Trump’s base to begin pushing back. The Koch brothers, for example, have recently and quite publicly fired a shot across Presidents Trump’s bow signalling their dissatisfaction with these tariffs.

If this were not enough in its own right, President Trump seems doggedly committed to pursuing a strategy to meet these ends that involves burning every bridge he can along the way. There is a need for President Trump, and indeed American at large to better understand the ways in which economic and security policies go hand-in-hand. Isolation in a global economy is a bad idea; isolation when confronting global security threats is suicidal. In particular, undermining the hugely beneficial economic and security cooperation the US has long enjoyed with Canada would be a massive misstep for the US. This would significantly hamper the US’ ability to face the new economic and security challenges that will require Canadian assistance.

The President is sorely in need of someone in the White House that will tell him what he needs to hear instead of what he wants to hear.

 

Feature Photo:  President Donald Trump and Prime Minister Justin Trudeau Joint Press Conference, February 13, 2017, Wikimedia Commons, 2018

Inset Photo:  Jim Mattis with Harjit Sajjan – 2017, Wikimedia Commons, 2018

Inset Photo: Trump-Kim meeting in Capella Hotel, Wikimedia Commons, 2018

Inset Photo: Secretary Kerry Addresses Delegates Before Signing the COP21 Climate Change Agreement on Earth Day in New York, Wikimedia Commons, 2018

DefenceReport’s Analysis is a multi-format blog that is based on opinions, insights and dedicated research from DefRep editorial staff and writers. The analysis expressed here are the author’s own and are separate from DefRep reports, which are based on independent and objective reporting.

Chris is a PhD student at King’s College London, Department of Defence Studies. He holds both a BA in Anthropology and an HBA in History from Lakehead University, as well as an MA in War Studies from the Royal Military College of Canada. He specializes in irregular conflicts, asymmetrical warfare, insurgency, revolution, guerrilla warfare, resistance movements, and rebel forces. His primary area of focus is the Caucasus, Eastern Europe, and the Balkans. Chris has served as an officer in the Royal Canadian Navy, as well as an advisor to the office of a Member of the Parliment of Canada.
cmurray@defencereport.com