Agri-Food Economic Systems published a thought piece on February 8, 2025 that provides valuable coaching on how to approach the threat of 25 per cent tariffs on March 4.  Authors Al Mussell, Douglas Hedley and Ted Bilyea share their strategic thinking. 

Here’s a key excerpt on understanding the Canadian interest:

“In a trade negotiation (or a trade war) what matters is not just the vulnerabilities of the other side -- it is also the vulnerabilities and opportunities of your side with respect to your counterpart.  We need to understand ourselves.

However, a common approach is to focus on the vulnerabilities of a counterpart and target those in retaliation. For example, if the members of a legislature coming up for election can be identified and the key industries located in their constituencies determined, targeting the products of those key industries with retaliation provides leverage. This is accompanied by engagement with regional governments to remind them of the benefits from trade and the value of partnership.

This approach is centered on the opponent, rather than integrated in a country’s interest and strategy; in fact, it is a tactic, rather than a strategy. It also presents an awkwardness in dealing with the domestic parties disaffected by the trade retaliation who face higher prices they must pay -- it is just their bad luck that their suppliers were located in the wrong place.

Understanding one’s interest is broader than this.  It balances what we want and what we don’t want from a counterpart, and relates them to our internal strengths and weaknesses.  For example, generally speaking, we want export access -- but in some cases there are alternative and maybe better export markets -- or third-country exporters that are competitors, or lack of scale, that de-emphasize the significance of export access.  In other cases, we have individual processing plants that require a specific export volume in order to be viable. Alternatively, there may be critical imports obtained from the counterpart without which our costs would greatly increase, or some products that are no longer feasible without imported inputs. 

Understanding these details entails much more work than figuring who is up for election where, and who/where has had a large Canadian export business that can be reminded of such.  Interests go right down to the internal and external details of individual industries and companies.  It cannot be skipped.

Maximum intelligence

Because there is a range of plausible objectives, undisclosed, that the U.S. may be pursuing with Canada at a given time, Canada must prepare for each prospective U.S. objective.  This entails much greater information collection, delineation of scenarios, and formulation of approaches and responses than would typically be the case. 

Moreover, the doctrine under which U.S. trade and agri-food policy has been conducted has changed, or will. Many of the people that have been engaged as career officials in the USTR, USDA, EPA, FDA, and other U.S. government agencies that Canadian government officials and agri-food organizations have worked with have left, or will be moving on, replaced by people with less experience in the agency or with agri-food, and are in positions due more to perceived loyalty to the new administration. The implication is that greater effort will be required to obtain good information, independently validate it, and greater preparation for interaction will be required than has previously existed.”

For the entire report, link here:   https://www.agrifoodecon.ca/uploads/userfiles/files/canada%20has%20a%20one%20month%20reprieve.pdf

Source: Agri-Food Economic Systems February 8, 2025