John Lash has a unique perspective on the North American trade war, considering he’s a Toronto native who has lived in Austin, Texas, for years. From Lash’s point of view, the trade spat calls to mind Sir Isaac Newton.
“Tariffs are, in a way, like Newton’s third law of physics,” said Lash, the group VP of product strategy at E2open. “Every action has an equal and opposite reaction. It’s the same kind of thing here with tariffs. Canada (has) weighed in, enforcing tariffs on the U.S.”
U.S. President Donald Trump recently imposed a 25% tariffs on imports from Canada and Mexico. Late last week, however, Trump paused the levies on certain goods entering the U.S. from Canada and Mexico, suspending tariffs on goods covered under the countries’ USMCA trade deal, according to multiple reports. Trump said implementation of his tariffs has been delayed to April 2.
Adding to this key juncture in Canadian history, on Sunday former central banker Mark Carney claimed a landslide victory to lead Canada’s Liberal Party and to become the country’s next prime minister. But the reconstituted Liberal government could be short-lived, according to Reuters. Liberal Party sources said Carney will call an election soon, banking on new momentum for the party in polls. If he doesn’t call an election, political opponents have said they would defeat the government when Parliament reconvenes.
Carney has said he supports dollar-for-dollar retaliatory tariffs in response to Trump’s tariffs.
“I’ve been in this business for a long time, and I’ve never seen anything like this from a volatility perspective,” Lash said.
Key Canadian Exports
Though Canada, a long-time U.S. ally, is overlooked by some Americans, The Great White North holds noteworthy bargaining chips related to trade. Canada is the world’s largest producer and exporter of potash, which is primarily used to produce fertilizer. The nation is also the world leader in canola exports. Additionally, Canada is a major producer of numerous other products, including aluminum.
The province of Saskatchewan “is the king of potash,” said Lash, whose employer specializes in supply chain software. And “fifty percent of America’s aluminum comes from Canada. So, what do you do about that if you’re packaging with aluminum? One of the things that Pepsi execs talked about on their earnings call was a shift to more plastic.
“Ultimately, a lot of this (cost) is going to get passed through the consumers, because there’s only so much that the businesses can absorb.”
The trade tiff appears destined to impact inputs, ingredients, packaging, goods, and manufacturers throughout North America.
Canadian Perspective
To put it mildly, Canadians – historically renowned for their niceness – seem united in their distaste for Trump right now.
“Canadians aren’t happy with any of this stuff,” Lash said. “Canadians are scratching their heads, saying ‘Why us?’”
“There’s a lot of confusion from a Canadian perspective – bewilderment and shock.”
Trump issued tariffs against Canada and Mexico because he said he wanted to curb undocumented immigration and stop drugs like fentanyl from “pouring into” the U.S. from the bordering countries. Canadians feel those are largely unfounded complaints.
Many Canadians feel Trump is simply trying to apply political pressure on America’s neighbors.
Potential Impact of Political Debate
“With the last Trump administration, with the tariffs on China, there was a big shift in soy and a lot of the soy business left from U.S.-China trade to South America,” Lash noted. “And it’s hard to get that stuff back once nations go and shift these purchases.
“This isn’t just an on-off switch; once you’ve lost it, it’s going to take a long time for that stuff to come back.”
The supply chain expert said there’s no telling how long the trade spat will last.
“Because of the nature of this [U.S.-imposed] tariff, it’s hard to know exactly when, or how long, it’s going to stay on,” Lash said. “This is to apply political pressure, so there’s no real test on whether you’ve met a circumstance or not. This is at the discretion of the administration to turn them on or turn them off. It can be removed at any time.
“Unfortunately, a lot of the damage will be done. The longer (the tariffs) go on for, even if it’s just for a short period, things are going to change; There’s damage in trade relations. There’s also a loss of trust.
“Once trade dynamics shift, it takes a long time for these things to come back.”
While it remains to be seen how this trade war will conclude, increased prices on several goods seem certain in the near-term.
“I hope you stocked up on your maple syrup and your tequila, because both of those are going to be going up (in) price,” Lash said. “Pricing is kind of like rockets and feathers; pricing goes up like a rocket and then drifts down like a feather.”
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