A tariff on Canada would be self-inflicted damage for America

Tariffs can backfire, especially when imposed against longstanding allies.

If President-elect Donald Trump carries out his threat and imposes a 25 percent tariff on all Canadian exports, it would hurt the Canadian economy. But it would also hurt the American economy, many of its businesses and especially ordinary Americans by causing a new inflationary surge.

Like the president-elect, I come from the business world. I understand his desire to build a balance of power and make the United States richer. We both share the desire to increase border security and to control immigration, and Quebec has been calling on the Canadian government to do it for several years. The United States' request that Canada do its share in military spending is also an objective that we share, especially since Quebec is an important player in the defense sector.

However, Trump should give Canada time to meet his expectations on these two issues before imposing tariffs that would do great harm to our two countries. Ever since the free trade agreement signed by President Ronald Reagan, the economies of Quebec (to speak of what I know best) and the U.S. are so integrated that customs tariffs on our products would inflict severe self-harm on the American economy.

Already, the threat of tariffs has caused a lot of uncertainty, hampering investment on both sides of the border. Our analysis concludes that tariffs of 25 percent on exports from Canada and Mexico would reduce American GDP by at least 1 percent over one year, not to mention inflation.

For example, Quebec supplies 64 percent of the raw aluminum used by American companies. The United States does not have the capacity to produce aluminum to replace this crucial input and will not have it in the medium term. Tariffs of 25 percent would therefore only result in increasing the prices of beer cans, car parts, airplane parts and a host of other products for American consumers and businesses.

Quebec is also a major supplier of American military aviation supplies, particularly of engines, landing gear and flight simulators. These products are not replaceable in the short or medium term and imposing tariffs of 25 percent will be equivalent to increasing costs by 25 percent for American companies and ultimately, for the Pentagon.

In terms of national security, the United States is rightly concerned about China’s near monopoly on strategic critical minerals, such as natural graphite, lithium, gallium and certain rare earth elements. Quebec can supply these strategic materials, and help America free itself from China’s grip. Imposing 25 percent tariffs on imports of its strategic critical materials could only harm the United States’ national security objectives.

The president-elect's concern to reduce his trade balance with the rest of the world is absolutely legitimate, but by attacking Canada, he is picking the wrong target. Canada’s trade surplus with the United States is due to imports of reliable and cheap energy, which fuel the American economy. Without these imports of Canadian oil, gas and electricity, the United States has a trade surplus of $58 billion with Canada.

Quebec exports electricity to the U.S., including via a transmission line to New York. This clean, dependable, and cheap electricity is an extraordinary advantage for New Yorkers and their businesses. It lowers the cost of energy for Trump Tower, to give just one example.

Canada will not become the 51st state in the union, but our economies are so intertwined that in terms of trade, we already have a customs union. This free trade in goods between our two countries, established by Reagan and Prime Minister Brian Mulroney, has greatly enriched our economies and our peoples. Instead of turning on each other, let’s keep on building a great North American economic powerhouse: it’s in our mutual interest.

François Legault is premier of Quebec.

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