By Dan Middlemiss, 18 January 2025
Here is an article that is certain to generate much vitriol on all sides.
In a (subscriber-only) column for The Globe and Mail, journalist Konrad Yakabuski argues that President-elect Trump’s threatened tariffs are a direct consequence of the United States’ recognition that it has been propping up the free world’s open trading system at the expense of its own national security interests. During his first term in office, President Trump made it very clear that he thought Canada had been free-riding off of US defence protection while Canadian manufacturers and resource companies enjoyed free access to the lucrative US market. Trump saw this as fundamentally unfair.
Yakabuski argues further that Trump’s tariff threats are supported by recent research that challenges the longstanding consensus about the benefits of free and open trade for the United States. A study by Stephen Miran (see link below) indicates that the United States has buttressed the international trading system at considerable costs to its own economy and national security.
Yakabuski further notes that, “Because of its status as the world’s reserve currency, the U.S. dollar has been overvalued, undermining the competitiveness of American manufacturers. To make matters worse, some of the very countries benefitting from an overvalued U.S. currency to flood the U.S. market with their products also shirk their NATO obligations. And Canada leads the pack.”
Yakabuski concludes, “The trade-security paradigm has shifted. Our leaders should have seen it coming.”
See, Konrad Yakabuski, “Trump’s tariffs are the price Canada must pay for freeriding on defence”, Globe and Mail, 15 January 2025. https://www.theglobeandmail.com/opinion/article-trumps-tariffs-are-the-price-canada-must-pay-for-freeriding-on-defence/
Here is the link to the article by Stephen Miran referenced by Yakabuski. https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf
If you have access, be sure to read the highly charged ‘Comments’ on the Yakabuski article as well. Shocking ignorance in some cases!
17 thoughts on “Free-Riding Chickens Coming Home to Roost?”
I am more than a little sick of our supposed allies constantly accusing Canada of freeloading on their defence investments. Canada has never faced a real threat to its own territory from any foreign adversary other than the United States. Russia? Who are you kidding? The last thing they need is more miles of empty tundra. Their rockets are aimed at Washington and New York, not Ottawa and Toronto. The Americans are not generously protecting us – they are begging us to help protect them. As for NATO, the countries that are now accusing us were investing less than we were to defence until they saw their own territory under threat. Not one of them has any serious intent of coming to our aid, or any thought that they might be asked to. Nato, for Canada, is about the same thing it always has been – our children, our labour, our dollars spent to protect Europe from itself.
None of this is intended to suggest that I am satisfied with the condition of Canada’s military, our industry, or our government. We need to do better on all fronts. But these self-serving nations – yes, the United States not least – that keep begging us to fight their wars for them, can jolly well say thank you instead of attacking their benefactor.
As for American trade policy of the last 30 years, if the Americans allow their businessmen to import goods from the far east, and keep their dollar high so as to make their own goods uncompetitive, that is indeed a foolish trade policy, but not one that has anything to do with Canada, which has done the same thing, and is in the same boat. Trade between Canada and the US is within a few percentage points of balance. Trade between North America and everyone else is wildly out of balance. America can deal with the real threat, or they can shoot the man standing beside them. It is their choice.
Good morning Michael,
Excellent points.
It will interesting to see the puerile excuses/deafening silence that the Europeans will use “to be somewhere else” if/when Canada invokes Article 5 to seek their assistance in defending its sovereignty!
Ubique,
Les
Les: Knowing President Donald J. Trump, he would probably just say to his favourite ‘buds’…..”Go ahead Vlad (Putin), do what you want with Canada!” NATO will NEVER invoke Art. 5 and come to Canada’s aid (like he did with Ukraine)! That’s when NORAD and NATO may just … fade away. Canadian Sovereignty is in just soooo much in trouble right now with our ‘friends’ to the South!
Good morning Dave,
I fear that you are correct.
I must add, though, that I was not thinking about Russian aggression when I spoke about Canada invoking Article 5.
Ubique,
Les
Michael, perhaps you are right, But, a critical point here is that Stephen Miran, the author of the referenced November 2024 study, is Trump’s incoming chairman -designate of the Council of Economic Advisors. This is the influential agency within the Executive Office that advises the president on economic matters. As such, a reasonable inference is that he has direct access to the President, and that his views on economic trade matters, including tariffs, conform to those of the Trump.
I assume that his advice will hold more weight with Trump than your suggestion, namely, “America can deal with the real threat, or they can shoot the man standing beside them. It is their choice.”
And Les, Article 5 can only be invoked in the event of military attack, not in response to economic threats from the US, however misguided these may be.
Good morning Dan,
I know and agree. That was my point.
Ubique,
Les
Hi Dan. Thanks for that information.
I certainly agree that they are not likely to listen to me! It might be different if our political leaders responded to the present aggression with more forceful rhetoric. Rhetoric can be very powerful, as Mr. Trump knows. Indeed, at the moment he has the whole world cowed through the use of rhetoric alone!
If there is no value in protecting the like-minded (i.e., Europe), if NATO is a raw deal, if the Russian ‘rockets’ are not aimed at us, then let us explore non-alignment. (NB: during the Cold War Soviet planners saw North America as a single target area.)
At the risk of splitting hairs, Europe has never asked Canada to ‘fight their wars for them’. They’ve asked us to fight wars alongside them. And the choice was always ours. In recent years we’ve limited our liabilities.
As for trade policy, the strength of the US dollar very much has something to do with Canada, since so many transactions between dissimilar currencies are denominated in USD. For this forum, I think the price of the F-35, the P-8, and those radars on the River class are about to get more expensive.
Hi Barnacle Bill,
I am not suggesting non-alignment, and I am not suggesting that Canada is right in breaking its word to NATO about 2% funding of our military. A promise is a promise, and the world is looking dangerous. Perhaps we should make fewer promises going forward – at least we will have told fewer lies! However, I would like to see our leaders push back on dishonest and self-serving criticism.
If the US dollar does go up, American manufacturing will be at an even greater disadvantage than it has been. If Mr. Trump is serious about fixing the US trade deficit – which I think he is – he needs the dollar to come down. I wonder whether it is too late to replace the American systems on the River-class destroyers with, say, British ones, that would not come with threats to Canada attached.
Even if Canada ups its defence spending in the short term, this may not get us out of the Trump administration’s dog house. It’s clear that Mr. Trump’s views of allies and alliances are fixed. He doesn’t really care for either. Like trade agreements, he sees them as burdens and encumbrances on the United States. Trying to placate him with more money (or promises of more) will not fundamentally change his views. And it’s his views – not those of any other in his administration – that count.
If we increase our defence appropriations, let’s do so for the right reasons. Those may include the defence of a liberal order (challenged not just by Russia or China, but by the US now), because we value Canada as independent polity worth defending from all challengers, because sovereignty costs money and not just rhetoric, etc., etc. But let’s not delude ourselves that Mr. Trump can be placated. He will carry his prejudices through his second term.
Whether they survive him is another matter.
Hi Barnacle,
Exactly!!
Ubique,
Les
I agree.
Given that President Trump has the attention span and the strategic acumen of an excitable toddler, perhaps Canada can just wait out his tariff and other threats and trust that he will eventually turn to other projects of self-aggrandizement. After all, Trump seems to be picking a fight with Canada because, rightly so, we represent easy low hanging fruit in so many respects. A lame-duck government representing a party that has defenestrated iself, and one that is the midst of a leadership campaign in which the major contenders are running as Conservatives! We are also being called out on our lamentable record on national defence, another indisputable fact. Trump is kicking us, much like the iconic sleeping dog, pour encourager les autres.
So, what to do in the face of draconian tariff threats and even threats to our very political future? What if Trump decides to follow through, if for no other reason that he can? One approach would be to thank Trump for continuing to protect us, according to him for free, but point out that under the imposition of his much heralded tariffs, Canada would be unable to sustain our current level of defence expenditures, let alone increase its spending to 2 percent of GDP, let alone 5 percent, especially when estimates put the possible contraction of our economy by around 4 percent of GDP following the imposition of 25 percent tariffs.
Ottawa might also follow the recent lead of Stelco, and signal that, in the climate of economic uncertainty surrounding the imposition of widespread tariffs, it would be ‘pausing’ indefinitely several of its pending major defence acquisitions with US suppliers. Several good examples have been mooted ranging from the purchase of P-8 surveillance aircraft, MQ-9B drones, F-35 fighter aircraft, and several major US FMS combat systems pertaining to the River-class destroyer (AEGIS, SPY-7 radars, missiles, etc).
For those who will argue that such actions would only undermine CAF capabilities, let’s remember that these systems would have only been delivered well after the period of maximum strategic threat forewarned by Canadian, US, and NATO military leaders. So no real loss to us, especially if the US is cutting us adrift in any case. Canada never has possessed the might to defend itself alone.
Given Trump’s grandiose proclamations to the effect that with a wave of his hands he can bring to a halt all major world conflicts and usher in a new era of Pax Americana, we should take steps to assure the Trump administration that Canada will do its part by immediately undertaking a series of confidence-building measures via reciprocal military exercises with Russia and China, and a robust series of naval port visits with all and sundry.
In the meantime, supporters of the Canadian military take heart. The CAF will remain as significant a military as it has always been of late – poised as a strategic dagger aimed at the heart of Hans Island!
I’ll wade into this one. President Trump was correct when he said our border is porous and we are not doing enough on defence. Canada is responsible for the state of our border and the state of our military. We take for granted the protection the US affords us and we haven’t been for many years doing our part in NATO and NORAD. This should be a wakeup call for the government to rebuild our military I mean a massive increase in capability and actually securing our borders better.
President Trump may be unbalanced but he fancies himself a businessman and his rhetoric on tariffs is I believe an attempt to intimidate our government and place himself in a position of power for deal making. It certainly have panicked our government and now all this tough talk from everyone including on these forums and online about boycotting US products and personal insults to the US president. That certainly helps things.
What we should be doing among massively fortifying our border and border services should go to the US with a shopping list of military hardware and cut a deal with the US to increase our defence spending. Instead we hurl our insults and talk tough when the US economy dwarfs ours, yes tariffs will hurt the both of us but we are small potatos in the grand scheme of things. It’s better to eat a bit of humble pie and work together for the benefit of both our countries.
Good morning Ted,
You are of course assuming that there is some logic behind Trump’s actions and that there is something that he wants which we can actually provide.
Is it not equally probable that he has conceived a visceral dislike (hatred?) for Canada/Canadians/Trudeau that can only be assuaged by conquest/annexation/grovelling submission with de facto (or de jure) colonial status at best for us?
Or (and), is it not possible that he actually believes his talk of tariffs paying the US government’s bills and allowing massive tax cuts for the oligarchs?
Ubique,
Les
Oh he doesn’t like Trudeau that’s for sure and I don’t doubt Trudeau’s visit and weakness he displayed emboldened the President to double down on these tariff threats. Trump sees the government as weak and in disarray and he’s right. We have all sorts of goods and resources that the US needs, we just need to stoke his ego and need someone in the government that can make a deal. We need to get past the next 4 years with this guy and we may need to eat some humble pie along the way.
There is no way that the US will annex Canada and people who think that are alarmist and foolish.
Good morning, Ted,
Thank you for your comments.
I think that we will have to agree to disagree about the likelihood of Trump attempting to take Canada; his level of success in this endeavour will depend, though, in large part on us.
Ubique,
Les