Business

Trudeau safe for now amid Trump trade war threats but angry farmers loom

Reuters

Canadian Prime Minister Justin Trudeau, facing the threat of a trade war from U.S. President Donald Trump, has unanimous domestic support for now but to keep a firm hold on power must wring concessions from an unwilling powerful dairy lobby in order to mollify Washington.

Trudeau, who over the last year has faced increasing criticism for backtracking on promises, ordering endless consultations on major topics and failing to fulfill many of his campaign promises, had taken a tougher stance against the United States in recent weeks.

Trudeau, facing elections in 2019, said on Sunday that Canada “will not be pushed around,” triggering a fierce attack from Trump and his advisers, one of whom apologized on Tuesday.

Trump is particularly incensed by Canadian tariffs imposed on dairy products, which he says are “killing” U.S. farmers, especially in Wisconsin.

He and other American politicians have long demanded Canada’s system of domestic dairy protections either be abolished or heavily modified to give U.S. exports a bigger share.

But Trudeau has little room for maneuver. Dairy farmers, who number about 11,000, have an outsized influence in Canadian politics, being concentrated in the vote-rich provinces of Ontario and Quebec.

Trudeau meets on Tuesday with the Dairy Farmers of Canada, which suspect he might be ready to sell them out.

Canada’s dairy sector is heavily sheltered under a government system, set up in the 1970s, that controls how much they produce but also sets prices that are far above those in the United States for domestic consumers.

The dairy system, or supply management as it is known, falls outside of the North American Free Trade Agreement.

Canada’s Parliament unanimously condemned the personal attacks on Trudeau on Monday, as the famously polite nation simmered over the U.S. weekend broadsides.

“I think it is good for him in the short term. The longer term is not nearly as clear,” said Ekos pollster Frank Graves. “Trade wars are never good for the respective combatants and if this escalates it could have very deleterious economic impacts.”

Trudeau’s Liberals are currently tied with the main opposition Conservatives in polls. A trade war, and the resulting massive job losses, would be a political failure for the 46-year-old prime minister who came to power in late 2015 promising to improve ties with Washington.

He could mitigate the damage by offering aid packages to affected industries although the bill would most likely run into many tens of billions of dollars.

Trudeau says Trump’s demands are in part linked to talks to update NAFTA. Trump, who has frequently threatened to walk away from the pact, is now threatening tariffs on auto imports.

People close to the prime minister reject the suggestion he misread Trump and cite what they say is the president’s highly unpredictable nature.

“Even if we gave him everything he wanted — and there is no way we would ever do that — who can say whether he’d be satisfied?” said one source, who declined to be identified given the extreme sensitivity of the situation.

Trudeau — who links the tariffs to the NAFTA talks — declined comment on Trump’s latest attacks on Tuesday, saying he would focus on protecting Canadian jobs.

Among the many uncertainties is how far Trump is prepared to match his tough words with action.

“When it comes to Trump tweets there’s a discount premium to them,” said Carleton University professor and foreign policy expert Fen Hampson, who advises Trudeau to “hunker down, say nothing, not rise to the bait.

Hampson noted that former Canadian Prime Minister Brian Mulroney, who pressured Washington for years on the need for a treaty to curb acid rain, only succeeded when George H.W. Bush replaced Ronald Reagan as president.

Assuming Trump will be gone soon may not be a wise game plan. Under one scenario being studied by Canadian officials, he wins the next election and stays in power until 2025.