First casualty of Trump's trade war is his country's reputation: Don Pittis

Can the United States be trusted anymore?

When we hear about President Donald Trump's latestovernight tweets on trade, the first reaction of most Canadians is to think about how it's going to affect us.

Evidently having a trade war with our biggest trade partner would not be a good thing for the Canadian economy.

But there is growing evidence the greatest victim of Trump's erratic and seemingly never-ending demands overtrade will be the reputation of the United States.

A real danger

"The danger's real and it's not just the rhetoric of the tweets," saidPeter Warrianof the University of Toronto'sMunkSchool of Global Affairs, where he isbilled as "Canada's leading academic expert on the steel industry."

Hesays if Trump's25 per cent tariff on steel and 10 per centtariff onaluminum areimposed as an executive orderthey could have an impact within a week, with truckloads of Canadian steel held at the border until the U.S. government receives a cashpayment to cover the tariff.

Even if the decision is eventually overturned, the disruption to two of North America's keyindustries, steel and automobiles, would be costly.

And once again, countries around the world who thought of themselves as friends and allies of the U.S.are considering how they will fight back.

"If someone sticks it to you on aluminum and steel, if you're going to retaliate, you're not restricted to those sectors," Warriansaid.

Clearly, if cooler heads prevail, things could stop short of atrade war. What you might call trade sabre-rattling is not uncommon as countries threatened with tariffs draw up lists of the imports they will tax in response.

Europe has already included Kentucky bourbon, Levi's jeans and Harley Davidson motorcycles goods they expect willhave a concentrated impact on jobs in areas that vote Republican.

Tit-for-tat

Tit-for-tat threats of that kind have happened many times in the past. The special thing this time around is the destruction of trust among countries that have long been close trade allies with the U.S.

Jean-Claude Juncker, president of the European Commission,has implied the mood has not changed following Trump's latest threat.

"So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this," he told German media. "But we have to do it."

And while it might be possible to write off Trump as the whacky guy who will say almost anything to divert attention from some other scandal orto raise a cheer among hard-linesupporters the things he is saying fly in the face of decades of accepted Republican positions on trade.

"Trade wars are good, and easy to win," as Trump tweeted at 6 a.m. on Friday, contradicts not onlyroughly 80 years of U.S. government policy, but virtually all economic trade analysis.

Not only that, Trump's commentsalso fly in the face of facts as outlined by the U.S. government's own trade officials.

But over the weekend, most of Trump's fellow Republicans failed to repudiate his comments spewing out one after the other on Twitter ideas and rhetoricthey know are ill-advised.

Whether accidental or intentional, misunderstanding how international trade works isno way for a country to maintain the trust of its allies.

"The Trump trade team continues to focus on the trade balance, but that focus is misplaced," economist Christine McDanielofGeorge Mason University'sMercatusCentersaid in an email.

She says the trade deficit is often larger when the economy is growing, and that in the past, trade surpluses have not correlated with job creation. She also points outthe U.S. economy has created tens of millions of jobs since NAFTAcame into force.

Waking up to risk

There are signs Republicans are beginning to wake up to the danger of Trump's pronouncements, if only to preventU.S. stock markets from crashing.

Yesterday, Speaker of the House Paul Ryan called onTrump to drop plans forthe new tariffs.

"We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan," Ryan spokespersonAshLeeStrong said. "The new tax reform law has boosted the economy and we certainly don't want to jeopardize those gains."

The head of the United Steelworkers, Leo Gerard, who happens to be Canadian, remindedTrump that Canadian aluminum is a strategic good for U.S. military procurement.

"The president, I don't think, was made aware of that," Gerard told CBC.

• Trump open to removing steel tariffs if he gets his way on NAFTA
• 'Trade wars are good, and easy to win,' Trump tweets

There seems to be so much the president has not been made aware of, includingthe idea that introducing steel tariffs as a new threat after seven rounds of intense NAFTA bargaining is no way to increase trust withpeople who, until recently, were America's closest trade allies and supporters.

In the short term, most experts sayTrump's disruptive trade statements will hurt markets,andif he manages to see them through, the U.S. economy.

But in the longer term, it is the credibility of the United States as a country that keeps its word, knows the facts, plays fairand seeks trade for mutual benefit that may be damaged the most.

It used to be that the U.S. set a standard.

After the latest trade spat settles down, aU.S. establishmentthat has beenwilling to meeklyfollow suchleadership could end up being a few notches lower in everyone's esteem.And in international trade, that counts.

• Canadian dollar dips below 77 cents US on trade worries

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