‘We are not playing that game’: Canadian aluminum producers in tough spot as White House swaps tariffs for quotas
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He characterized the roll-back as a “reprieve” and “better than a full-on shooting war on the trade front,” but unlikely to be the final episode in U.S. trade protectionism.
Porter said that he may be “slightly out of step” with other economists, but he believes there are ways that a country such as the U.S., with a large economy and the ability to influence global trade, can benefit from protectionism. Sometimes, it can encourage companies to invest in the U.S. rather than somewhere else, he said.
Nonetheless, Porter said it never made sense to apply tariffs on Canadian aluminum. The abundance of cheap hydroelectric power in Quebec and British Columbia puts U.S. smelters at a natural disadvantage, given that electricity is a major cost.
The tariff, if allowed to stand, would have raised costs in other U.S. industries, he said, pointing to the automotive sector as an example, which relies on Canadian aluminum and is already in a fragile state.
This whole episode is just another turn of the screw in more managed trade, and less free market
BMO chief economist Doug Porter
“This whole episode is just another turn of the screw in more managed trade, and less free market,” he said.
Looking ahead, Porter and others say that regardless of who wins the U.S. presidential election, protectionism is on the rise.
Scott Lincicome, a lawyer and senior fellow in economic studies at the Washington, D.C.-based Cato Institute, said that the very fact that the Trump Administration imposed a tariff on Canadian aluminum under the rationale that it is a national security threat shows how much normal trade relations have been upended.
