CHARBONNEAU – Export tax would cause U.S. pain and keep money here

DESPITE BEING LEADER of the most powerful nation in the world, President Trump has a fragile ego.

He’s a vain man. He wants people to love him, to fear him, to admire him. If you can make him feel that way, he might do what you’re asking. If not, not only do you not matter, you could be his next target.

When Trump first came to office, counter-tariffs worked.

Counter-tariffs alone are unlikely to work this time because Trump has surrounded himself with staunchly pro-tariff advisors and has learned how to press the levers of power, says Kevin Milligan, a professor of economics at the University of British Columbia:

“This will be a total trade war, and restricting ourselves to putting cutesy tariffs on stuff is a strategic error. We need to find things that will make this White House feel pain, and targeting the things we have that America needs is the right way to think.”

Export taxes hit the spot. They will cause Trump to wince.

Export taxes are collected on specific resources. Like U.S. tariffs, they increase the price of that resource to Americans. Unlike U.S. tariffs, the tax stays in Canada and can be distributed to affected Canadian exporters.

Another advantage of export taxes is that we get to choose which resources apply. With U.S. tariffs, Trump targets Canadian industries.

An example of how an export tax would work is the softwood lumber battle in the 1980s. In response to Washington’s intended 15 per cent tariff on our lumber shipments, Canada instead imposed a 15-per-cent export tax. It was part of an agreement between Ottawa, the provinces and the industry.

The U.S. dropped their 15 per cent import tax because our export tax had the desired effect (at least from the U.S. point of view), of increasing the price of Canadian lumber. But the money generated by the tax stayed in Canada and was distributed to the provinces.

There are lots of targets to prick the balloon of Trump’s ego.

The orange man recently took a swipe at Canada, saying: “we don’t need anything they have.” We’ll see.

Canada sits on top of an abundance of oil, potash, uranium and other critical minerals worth $1.1-trillion. And every year, we send vast amounts of those resources to feed the voracious economic appetite of our neighbours to the south.

Export taxes are a drastic step but this is war.

Federal Natural Resources Minister Jonathan Wilkinson said that “nothing was off the table” and that Canada will “look to maximize the pain that is felt by American producers of goods and minimize the concurrent pain that is felt by Canadians.”

Alberta Premier Danielle Smith prefers the kissy-kissy approach.

She was the only premier not to sign a federal joint statement last week that included retaliatory tariffs or oil or withholding oil from the U.S. as potential strategies.

Having hitched her wagon to Big Oil, Smith wishes that tariffs would just go away.

“We have a short window,” said Smith. “I think, to demonstrate the very positive relationship that Canada and the U.S. have from a tariff-free point of view and why it should remain tariff-free.”

Good luck with that.

David Charbonneau is a retired TRU electronics instructor who hosts a blog at http://www.eyeviewkamloops.wordpress.com.