A trade war with Mexico would carry considerably less geopolitical risk. It would, however, be awkwardly tantamount to a trade war with ourselves, given how integrated the two economies have become since NAFTA went into effect in 1994. The United States and Mexico have, for example, developed a joint manufacturing platform; a blanket tariff on imports, as Trump once suggested, would be a blow to American exporters of intermediate parts, as well as consumers. And the bilateral relationship, for obvious reasons, is a bit strained as it stands.
By contrast, a trade war with Canada would be a relatively straightforward affair; the skirmishes in April suggested as much. Trudeau, in a call with Trump, denounced the lumber tariff as “unfair,” and vowed to “vigorously defend the interests of the Canadian softwood lumber industry”; he added that when it comes to dairy products, Canada is the one with the trade deficit.
Such disputes might lead to protectionist policies that would hurt consumers and businesses on both sides of the border. But they would also give Trump a chance to illustrate the advantages of the “economic nationalism” he espouses. “I believe in free trade, but it also must be fair trade,” he explained in February, in his first address to Congress. It’s hard to assess the merits of that approach, since it remains unclear what Trump means, exactly, much less whether his vision can be achieved. But it’s also unclear whether Trump can be deterred; on April 26, he mulled an executive order that would have withdrawn the United States from NAFTA outright. A trade war between the United States and Canada wouldn’t be ideal. But the type of skirmishes we saw in April might prove to be a useful distraction.