When Donald Trump’s own former vice president is warning that America cannot afford a trade war with Canada, Washington should probably pay attention.
Mike Pence is not defending Canada out of sentiment.
He is talking about American wallets.
“The last thing we need right now as our economy is getting back on its feet is a trade war with Canada,” Pence told CNN on Sunday.
And then he said the part that cuts directly through the politics: American businesses and American consumers pay American tariffs.
That matters because the United States has now imposed 50% tariffs on roughly US$20 billion worth of Canadian goods after negotiations with Canada collapsed.
Mark Carney has responded by suspending the talks and announcing dollar for dollar Canadian retaliation beginning September 8.
So this is no longer a theoretical tariff threat.
Businesses are now having to calculate the actual cost.
And Pence’s warning gets to the heart of the problem with Trump’s strategy.
Tariffs are collected from importers inside the country imposing them.
If an American company imports a Canadian product hit with a 50% tariff, the U.S. government collects that tariff from the American importer.
The Canadian exporter may eventually cut its price or lose business, but there is no guarantee it absorbs the entire cost.
Some of that burden can land on U.S. companies.
And eventually on American consumers.
That is why Pence specifically connected this trade war to affordability.
Americans are already sensitive to the price of housing, groceries, vehicles and everyday goods.
Now Washington is deliberately increasing the cost of importing products from one of the most deeply integrated economies in the world.
Canada is not some distant trading partner.
Canadian materials are inside American factories.
Canadian lumber goes into American homes.
Canadian metals go into American manufacturing.
Canadian energy powers American businesses and households.
Canadian parts move through North American auto supply chains.
So when Trump raises the cost of those inputs, the economic consequences do not conveniently stop at the Canadian border.
American producers can become more expensive too.
That is exactly why the backlash inside the United States is becoming interesting.
Pence is now criticizing the confrontation.
American lawmakers and governors, particularly in states economically tied to Canada, are raising concerns.
Business groups including the U.S. Chamber of Commerce have reportedly urged both countries to get back to negotiations.
And there are growing warnings that a prolonged tariff fight could add to inflationary pressure in the United States.
That does not mean Canada escapes without damage.
Far from it.
The 50% tariffs could seriously hurt Canadian businesses that depend heavily on American customers.
Some exporters may lose contracts.
Some companies could reduce production.
Investment decisions could be delayed.
And Ottawa may have to spend more taxpayer money supporting affected workers and industries.
Canada’s own retaliatory tariffs will also raise costs on this side of the border.
Carney has acknowledged that.
But this is where Canada’s position deserves more attention.
Ottawa spent weeks negotiating.
As recently as August 20, Canadian officials were saying the two sides were “very close” to a deal.
The proposal being discussed could have reduced U.S. auto tariffs from 25% to 15% and cut steel and aluminum tariffs in half.
Then negotiations collapsed.
Carney says Washington introduced last minute changes that were unfair, uneconomic and raised doubts about whether Canada could rely on the agreement at all.
So he walked away.
That is important.
Canada did not reject negotiation.
Canada rejected the terms it was being asked to accept.
There is a difference.
And now Pence is effectively warning Trump that punishing Canada may also punish Americans.
That exposes the basic weakness in the idea that the larger country automatically wins a trade war.
The U.S. economy is enormously larger than Canada’s.
There is no serious comparison.
Washington therefore has far more leverage.
But Canada and the United States spent decades deliberately building supply chains that cross the border.
That integration created efficiency.
It also created mutual dependence.
Trying to economically hurt one side without creating consequences for the other is much harder than the political rhetoric suggests.
Carney appears to understand that Canada cannot win simply by matching tariffs forever.
The more important strategy is reducing the vulnerability that gave Washington so much leverage in the first place.
That means more trade outside the United States.
More Canadian infrastructure.
More domestic manufacturing.
More interprovincial commerce.
More routes for Canadian energy and resources to reach global customers.
And more investment that does not depend entirely on predictable access to the American market.
Carney has repeatedly described the goal as building a “stronger, more independent, and more competitive economy at home.”
That is the part I think matters most.
Canada should absolutely negotiate with Washington again when a reasonable agreement is available.
The economic relationship is simply too important to abandon.
But Canada should also learn from what just happened.
An economy heavily dependent on one customer becomes extremely vulnerable when that customer decides access to its market comes with new political conditions.
Pence seems to understand the other half of that equation.
America may have the bigger economy.
But disrupting trade with Canada does not happen in a vacuum.
American businesses buy the imports.
American factories use the inputs.
American families eventually see some of the prices.
Which is why his warning to Trump is so important.
Drive a hard bargain if you want.
But starting a trade war with one of your largest and most integrated economic partners while Americans are already worried about affordability may prove much more expensive than the White House thinks.
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Source: CNN, Washington Post, Reuters, Prime Minister of Canada.
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