‘We need to be prepared’: Former Alberta representative in Washington says Canada needs a plan for possible U.S. tariffs

Canada West Foundation CEO Gary Mar discusses U.S. President Trump's inauguration and expectations for his upcoming term

Gary Mar, Canada West Foundation CEO, speaks with Alberta Primetime host Michael Higgins about U.S. President Trump’s inauguration and his expectations for the upcoming term.

This interview has been edited for clarity and length.

Michael Higgins: You were in Washington on inauguration day. As you sat on the plane flying home to Calgary, what did you ponder as your primary takeaway?

Gary Mar: I’ve been to three inaugurations now and this was like no other that I’ve ever been to. The Obama inauguration in 2009 and then the first Trump inauguration in 2017 were very different.

The inauguration is about the peaceful transition of power from one president to another president. That’s the function of it, but I’ve never been to an inauguration where it was book ended by political rallies on both sides at the hockey arena where the Washington Capitals play. Both of the rallies were very partisan in their nature, but so too was the inauguration itself and the speech that the President gave.

It was a remarkable departure from the normal protocol of what happens at such events.

MH: It’s a challenge to get a read on what his motivations are for pressing forward with the threat of tariffs, and he certainly doubled down on that in a speech to the World Economic Forum today, but if it is that Trump is driving at an early renegotiation of the trilateral agreement, what might that spell for Canada? What are the considerations?

GM: It’s interesting, his approach to all of this. I think that right now he might not be negotiating with Canada, he’s negotiating through Canada. For example, in his comments that were broadcast to Davos earlier today, we saw him doubling down on what he was going to do with Canada. So I think that his message is, ‘If I’m prepared to do this to our best trade partner, imagine what I’m going to do to you.’

So in that sense, we don’t know what he will or will not do. We know that on Sunday, before the inauguration, there were two different factions in his policy team. One saying the 25 per cent tariffs, broadly, do it today, and the other faction was saying, no the 25 per cent tariffs are a nuclear option, start with a graduated tariff.

The part that I think won the day is that that faction said, if you put 25 per cent tariffs on your first day, you will collapse capital markets, you don’t want to do that on your first day. The America First policy writers like Robert Lighthizer, the former U.S. Trade Representative, I think made the argument, what you really want to do is you want to create jobs in the United States, you want to bring investment to the United States.

Particularly, if you look at energy, that’s exactly what’s being done. Canada puts crude oil and natural gas in pipelines and creates jobs at the other end. Vice President Vance knows the refinery in his home state of Ohio, and he knows the jobs that are created there, that upgrade that crude oil and turn it into gasoline and diesel, is because of crude oil that comes from Canada.

People in the Gulf states would know that the natural gas that comes from Canada to LNG plants there create jobs in the United States and that’s a certain case all over the United States, wherever our oil and gas goes. So hopefully Mr. Lighthizer’s views will prevail, but the President, in addressing Davos, talked about a $250 billion deficit that they run as a trade deficit vis-a-vis Canada.

That’s actually not what the numbers are. It’s $60 billion, which is $60 billion out of the $1.1 trillion trade deficit that the U.S. has with all of its trade partners. But if you take energy out of the picture, actually the United States has a very healthy trade surplus.

MH: Then obviously comes the response, our premier’s preference is words over action. How do you weigh the effectiveness of that as an approach?

GM: Take, for example, the idea that some premiers and the Prime Minister said, ‘All options are on the table.’ I’d say, yeah okay, all options except the dumb ones. So take the dumb ones off the table, and let’s look at the idea of putting an embargo on oil from oil and gas coming from Canada to the United States.

It’s not clear to me why consumers in the United States would want that. They may have anger if the President of the United States puts tariffs on oil coming in, but if you ban the oil from going in, then you displace their anger towards the President and put it on Canadians, and I don’t think that’s a position that you really want to be in. So I put that in the category of dumb ideas and so that shouldn’t be on the table.

We don’t know at this point how broad these tariffs are going to be, how long they’re going to last, how deep they’re going to be. We need to be prepared, as Canadians, our governments, federal and provincial, we need to be prepared in all the circumstances and look at the scenarios, but we don’t need to talk about what we’re going to actually do until we know what we’re dealing with. So be calm, be prepared.

We’ve had this situation before. U.S. President Richard Nixon placed tariffs on Canadian goods back in the early 1970’s and the inflationary impact of them was so high that they didn’t last very long. Less than half a year later, they were removed.

The last point is on the diplomacy piece, the relationship between Canada and the United States is broad and it’s deep, and it’s about more than just the President of the United States and the PM, it’s more than Ottawa and Washington. It’s about provinces and states, it’s about cities with each other, it’s about businesses that operate on both sides of the border, it’s about unions that work on both sides of the border, and it’s about chambers of commerce.

All chambers of commerce, universities, businesses, and premiers should be engaged with their major customers in the United States, because those are the people that actually vote for the President of the United States. We don’t, and so we need to engage with them, and their self-interest will result, hopefully, in self correction.