The View from China

 

They left out Greenland.

One of my Chinese students asked me this morning whether Trump is really planning to take over Canada. And how I would feel about that.

Good question. It seems it is on everyone’s mind now, worldwide.

I don’t see why Trump would back down, now, on the devastating tariffs on Canadian goods. By imposing them, he wins any way you look at it. 

At a minimum, it cajoles the Canadian government into making a real effort to close the border, and improve our national defense. 

But I suspect this is not his preferred option. And, luckily for Trump, the Canadian government is determined instead to enter a trade war that only Trump can win. They really are that stupid.

Imposing and maintaining the tariffs gives Trump a major new source of government revenue. This allows him to lower income taxes, turbo-charging the American economy.

Trump says the US does not really need cars from Canada. He is surely right. The Auto Pact was always a gift. Trump wants to pull as much auto manufacturing as possible back across that border into the declining rust belt.

Trump says the US does not really need Canada’s oil and gas. That was supposed to be Canada’s trump card. But on paper, he is right. During the last Trump term, he made the US a net exporter of hydrocarbons. Fracking has opened up vast new reserves. Cutting off Canadian supplies encourages their development, boosting the US economy and keeping the money in the States. Those who think the US needs Canadian oil are thinking short-term, looking at how the infrastructure is currently set up for Canadian imports. But Canada is at least as dependent on this infrastructure: we do not have the transportation capacity, thanks to prior government decisions, to sell oil and gas in volume to anyone else. We have to sell it to the US, and if the US imposes tariffs, we may have to lower our prices to compensate, to preserve our market.

Some point to the electricity grid in the Northeast, dependent on purchasing hydro power from Quebec. And gloat over the Americans having to sit there in the cold with only candles. But here we have the same issue: if Canada cannot sell that hydroelectric power to the US, it just goes to waste. Meanwhile, Trump’s tariffs will be stirring the building of new nuclear plants to supply this need. An economic boom for America. For Canada, there is no up-side.

This will all cause the Canadian economy to fall into recession. Why is that Trump’s concern? If Canada gets poorer, it will have to sell everything it produces to the US at lower prices. If it collapses, all the better. Trump may lose the tariff revenue, but he can walk in and take all Canada’s resources. And he gains a far more defensible perimeter, from either foreign invasion or illegal immigration and drug smuggling: oceans on three sides and half of a fourth.

If Canadians were smart, they would clamour to join the US now as soon as possible. We may grumble, but it is the best option we have. It might call Trump's bluff, causing him to back down. He may not really want Canada.

And that is what I told my Chinese student.

He was more disturbed by the prospect than I was. “Not good for China,” he concluded.

Which, given the global competition, may be another reason to recommend it.