How Trump uses disinformation in his trade war with Canada

"Nobody knows that Canada is charging our dairy farmers," U.S. President Donald Trump complained Friday in the Oval Office. "They have 270 per cent tariffs. Nobody knows that. Nobody knows it. They have up to 400 per cent. They have a couple of tariffs at 400 per cent. Nobody knows that. Nobody talks about that."

In fact some people have talked about it a lot, most prominently Trump himself and his Commerce Secretary Howard Lutnick. Indeed, one of the issues complicating the negotiations over tariffs between the U.S. and Canada is that the president is telling millions of Americans that Canada routinely charges exorbitant tariffs on a range of U.S. goods from cars to clothing.

The Trump administration has spread disinformation about the true terms of trade between the two nations as a pressure tactic, falsely presenting the "over-quota" tariff rates that are almost never charged as the normal rate.

Both Trump and Lutnick seem content to spread an apples-to-oranges comparison of U.S. and Canadian tariffs, implying that Canada's over-quota tariffs are the direct equivalent of the U.S. day-to-day tariffs under the Canada-U.S.-Mexico Agreement (CUSMA) which are zero.

The reality is that over 97 per cent of U.S.-Canada trade in agricultural goods and over 99 per cent of trade in manufactured goods occurs under a zero-tariff rate, as Canada's Ambassador Kirsten Hillman now spends much of her time patiently explaining.

The numbers often cited by the White House are in fact penalty tariffs that are only incurred when trade in certain items exceeds a certain volume, and rarely or never charged in practice. Most trade between the U.S. and Canada is not subject to any limitations of volume, but a small number of products are. The attention is often on dairy, explained Al Mussell, research lead and founder of Agri-Food Economic Systems, Inc., but the quota list goes wider than that.

"You could talk about other supply-managed products [chicken, eggs] in Canada, you could talk about sugar and peanuts in the United States," he said.

The U.S. protects its sugar beet and sugar cane industry from outside producers through a tariff rate quota, as well as its cotton, beef and cereal farmers. Canada famously does the same for its dairy and poultry farmers. But it also issues an annual quota for wheat and barley and some other products.

The quotas mostly cover niche areas of the U.S. and Canadian economies, some protected because of cultural or regional significance. For example, the U.S. has always put quotas on imports of brooms and whisks, despite one brief scare when American broommakers were accidentally left exposed to Mexican competition. 

Prior to the creation of the World Trade Organization at the end of the 20th century, import quotas were hard caps. Today imports are allowed to surpass quotas, but are then subject to very high tariffs intended to render them uncompetitive.

"This is not an uncommon form of trade policy," explained University of Calgary economist Trevor Tombe. "There are roughly 1,200 tariff rate quotas around the world."

Trump and White House officials have often often presented the over-quota tariff rates charged by Canada as the going rate for normal trade, and omitted to mention their own over-quota rates that range as high as 350 per cent for tobacco (the single-highest tariff on the books affecting U.S.-Canada trade.)

"I think it is a selective piece of communication," says Tombe.

Such messaging by the Trump White House is nothing new. During Trump's first administration, his NAFTA negotiating team spread false claims about the balance of trade by misleadingly counting non-Canadian pass-through goods that entered North America through a Canadian port as Canadian-origin, in order to make the U.S. trade deficit with Canada appear larger than it really was.