The Current - This U.S. economist is pushing for tariffs on Canada

Episode Date: January 30, 2025

Economist Oren Cass has been pushing for a new economic strategy in Washington, and supports the sweeping tariffs that could be imposed on Canada this weekend. He says those tariffs will hurt in the short term, but thinks they’re ultimately necessary to bring manufacturing jobs back to the U.S. — and rebuild the U.S. trade relationship with the rest of the world.

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This is a CBC Podcast. Hello, I'm Matt Galloway and this is The Current Podcast. It is two days to midnight. Canadian leaders are mounting a determined defense against President Donald Trump's threat of 25 percent tariffs. Yesterday, premiers met virtually with the Prime Minister Justin Trudeau, while Foreign Affairs Minister Melanie Jolie was in Washington sitting down with the new Secretary of State Marco Rubio. But Melanie Jolie was clear to point out who was not in that room.

The ultimate decision maker is President Trump. This is just the reality of dealing with the Trump administration and we need to make sure that we're ready to deal with that unpredictability. Melanie Jolie reiterated the government's plans to retaliate if terrorists are imposed on Canada. Joining me now is Orrin Cass. He has been a leading voice in the Make America Great Again movement, calling for the U.S. to rethink free trade and oppose import tariffs. He's chief economist with American Compass.

It's a conservative think tank based in Washington, D.C. And he is in our studio in Washington, D.C. Orrin Cass, good morning. Good morning. I'm really glad to have you on the program. Thanks for being here. Um, as you know, politicians and business

leaders and workers on the shop floor in this country are losing sleep over what might happen on Saturday and, uh, preparing to hit back. Do you have any insight into what Donald Trump may do? Well, I think approaching the tariff issue requires considering a few different Donald Trump may do? Well, I think approaching the tariff issue requires considering a few different issues,

because one question that US policymakers are very focused on is the economic dimension of trade and the extent to which US economy has really been harmed by free trade, with China in particular, but frankly frankly with the rest of the world. And we see that in the enormous trade deficit that we now have. It's typically about a trillion dollars a year.

And we see that in what has happened to our own industrial economy. I think there's a separate issue of the US relationship with other countries in the world, including close allies like Canada, and the role that tariffs and economic policy generally are going to play in defining those relationships. And I think it probably makes most sense to think about this tariff question with Canada in that second context. I think it's probably less a question of the details of our trading relationship, which in general can benefit both sides, and more the broader geopolitical relationship where, you know, I think President Trump has

made very clear he's looking to move the United States away from what has been our model really throughout certainly the post-Cold War period where the U.S. has largely tried to operate as a sort of benevolent hegemon and instead shift toward a model that says the U.S. wants to focus on U.S. interests and see how its relationships with other countries are serving Americans first and foremost. So a trade war with Canada perhaps is not what you were hoping to see in the early days of this administration?

Well, I don't know that the result of it will be a trade war. I think, you know, a really interesting question is how and whether Canada should and will retaliate. I certainly understand the reasons for saying that's, you know, that's of course what Canada will do. But I think the bigger question is what is the reset of this relationship going to be

and how does the United States want to proceed in shifting away from this model that just says free trade no matter what to one that says we would like to have a free trading block and it certainly makes sense that Canada should be part of it. But we also want to make sure that it's going to be on the terms that work as well as possible for the United States. Let's walk through how you think this could work because in some ways this is a shift in thinking.

You think of the conservative movement and Ronald Reagan, conservative icon, championing free trade. Walk me through why you're thinking the US, when it comes to free trade, should impose import tariffs to reshape that relationship with the rest of the world. Well, I think Ronald Reagan is actually a terrific place to start,

because it's not really true that he was a free trader. In fact, when he left office, the Cato Institute, which is probably the main libertarian group here in Washington, called Reagan the worst protectionist since Herbert Hoover. Reagan certainly supported free markets, but he also recognized how trade, and in that era trade with Japan in particular, was not

necessarily working in US interests. And Reagan pursued a range of very aggressive protectionist actions vis-à-vis Japan that were focused first and foremost on ensuring that domestic industry in the United States remained strong. I think what's happened is that really in the era after Reagan, after the Cold War ended, we moved into this period where, I mean, we could, there's a lot of very interesting kind of history on the economic theory, but somehow, you know, the leading economists decided to promote this model of globalization that really wasn't about economics at all.

There is no tradition in actual economic theory of believing that you should just do free trade no matter what, and you should just lower your trade barriers and that will definitely be to your benefit. The argument, you know, if you think back to let's welcome China into the global system for instance, it was really about the so-called liberal world order. The idea that if you allowed free trade, you would help move the whole world toward democracy, toward liberalization and free markets, and that would be to everybody's benefit.

And I think that's a very nice story. It also has turned out to be catastrophically wrong. And so I think what you're seeing now is not some kind of abandonment of Ronald Reagan or traditional conservative principles, it is an abandonment of this strange post-Cold War period where, you know, frankly, the US launched a number of very idealistic projects, both at home and around the world, that did not work out at all.

And so it's a return to more of a realism, both in foreign policy and in economics. What would tariffs accomplish? Because there are economists who say that this is destructive, that it's lunacy, that it's horrifying. You've said that in some ways they're ignoring the collective benefits of what tariffs could be. What are those benefits?

Well, the benefits are that tariffs put a thumb on the scale for domestic production. And it's really important to recognize that those economists who say that this is lunacy and so forth, they literally do not believe that making things matters. Their economic models do not recognize any value to a domestic economy in actually having an industrial base, any view that that has any effect on the quality of jobs available to people, the rate of growth and innovation. And so what they are doing essentially is working from this model that said, for instance, well, let's do free trade with China.

And if all of the production moves to China, that's fine. We get more cheap stuff. And they're just continuing to apply that model and saying, if that's what, we get more cheap stuff. And they're just continuing to apply that model and saying if that's what you believe, then we should keep doing the same thing. And so within its own logic, if you believe that, then sure, they're right. But if you step back and look at what that has led to,

certainly for the US, to some degree for a lot of developed countries, the outcomes have been terrible. And so, you know, I think a helpful way of thinking about it is to ask whether you think the free market and free trade, without any constraints, is producing the best outcome. If you do, then obviously interfering in that would be silly.

If you think the outcome we have now is not good, that it has been really harmful to lose our industrial base to become dependent on countries like China and so forth, then a policy like tariffs that corrects that isn't lunacy at all, it's common sense. Somebody phrased this as make America make things again. Is that fair? Yes, I think that's exactly right. And I think you see in a lot of ways, the term that's in fashion, it's a little bit clunky,

but very descriptive is reindustrialization. And the idea that actually across a host of industries and partly it's actual manufacturing, but it's also natural resources and energy and critical minerals and actually wanting to have economic strength in those precursors to all of the rest of the prosperity that we then hope to enjoy. Let me ask you about what that would actually mean and what it would look like to shift,

because the reality is that the Canadian U.S. economies are highly integrated. The United States depends a lot on imports from China as well. Jim Stanford is an economist in Canada with the Centre for Future Work. He was on our program earlier this week. Take a listen to what he said. Canada is America's biggest market for export as an economist in Canada with the Centre for Future Work. He was on our program earlier this week.

Take a listen to what he said. Canada is America's biggest market for exports of goods and services, about half a trillion dollars a year, far more than they sell in China or Mexico or Europe or anywhere else. So that's going to hurt. That's like shooting yourself in one foot.

But here's where they shoot themselves in the other foot at the same time. Most of what we sell to America is not finished products that show up on the shelf at Costco. Instead, we sell them unfinished products. So this includes all of the inputs and materials and raw materials and energy and parts that go into US businesses.

So if those all become 25% more expensive, American businesses are gonna have a heck of a shock, a cost shock. Orrin Cass, is the reality not that if those tariffs come into play, life for Americans will be more expensive? I think there's definitely a good point being made there about essentially what is the short-term disruption associated with the sort of policy

that the Trump administration seems determined to pursue here. And I think you're seeing that in a lot of things that the administration is doing right off the bat in domestic politics as well. There's this view that we have this kind of ossified status quo that has been allowed to just settle into place regardless of whether its effects are good or bad and no one shall ever question or touch it. And the president's strategy on all sorts of issues has always been to say the right

way to break from that is with a quite sharp break. And, you know, I think there's an interesting strategic and tactical question of whether that is necessarily the best way to achieve change. There's going to be pain with that though, right? Oh, there's always pain associated with change. And so that's, I think that's exactly the point is that I think there's a lot of different theories of, okay, what is the best way?

If you want to achieve dramatic change to actually start down that path Do you sort of try to very gradually and by small steps turn the ship or do you? Start with something much more dramatic Uh that sort of resets the playing field and And in a lot of areas, the Trump administration has shown it's very determined to take that latter course. I think- Do you think Americans will have the stomach for that? I think that's certainly a reasonable question.

Trump administration clearly across all of these issues, whether it's in terms of federal spending, immigration policy, trade policy, thinks the answer is yes. My personal view is there are a lot of situations where dramatic action is quite constructive. There are also a lot of places where I think transition costs and transition time and so forth have to be really taken into consideration. But I think for Canada and everybody in understanding what is going on and trying to anticipate and think about how to react to it,

the important thing to understand is that the approach that the Trump administration is taking on all of these dimensions is to say, look at the broadest level, whether you're talking about how the federal government operates, how the US immigration system has run, how free trade has functioned around the world, the existing system has been a bad one and they're very determined to move in a very different direction.

And so they are aiming to take very dramatic action very quickly on it. How do you think Canadians should think about our relationship with the United States in light of that? I mean, Donald Trump has said, we don't need your stuff. We can just make it here. We'll deal with our own stuff

and we don't need what you're producing. Is America still our closest friend and ally, do you think? I think very likely so. I think for both the US and Canada, there's obviously an enormous amount of benefit in a close friendship and partnership. Even when the US is threatening,

I mean, the larger partner in this relationship is threatening enormous tariffs that people believe could cripple the economy in this country? Well, I guess I don't know as much about Canada and it's, among other things, it's options. I think the reality of the situation is that Canada is a much smaller and less powerful in all respects country than the United States.

And so with not a lot of other, I mean, I guess Canada could go try to be in a close relationship with China instead, but frankly, I don't recommend it. And so I think this is exactly where you see this interesting mindset shift where for several decades now, it has just been assumed that the United States is going to operate on the world stage essentially with with both of its arms tied behind its back and and not operate out of self-interest and instead operate in this magnanimous way that believes that somehow by just promoting this kind of liberal world order it will ultimately work out best for everybody. And unfortunately, that has not worked out for the United States.

And so I think it is important for Canada and certainly, you know, all of NATO, I think, is learning that it has to start thinking about this differently to think about the United States that is going to pursue its own interests first. I think you can still be a very good friend and ally with a country that's pursuing its own interests first, but you have to recognize and respect what those interests are and think about a relationship that proceeds accordingly. We're almost out of time. Let me just ask you two things quickly. One is, and this speaks to what you're just talking about, does it serve American interests if its neighbors and friends are economically

crippled by its actions? Oh, no, I don't think so. I think the U.S. is certainly in better shape if its neighbors and the economies that it is engaging with are strong ones as well. And yet America first suggests that you have to look out for your own interests above those other interests.

Well, I guess I don't see those things in conflict. I mean, you, you obviously always are going to have a number of different, um, factors to consider. The, the point of what I'm describing is not that the United States would be in, in the best shape if it crippled everybody else around it. If in calculating what is in the best interests of the United States, the question is how to be operating within a system

that has healthy, strong partners around it, but that are operating in relationship to one another in a way that at the end of the day leads to the best outcome for the United States. Just briefly and finally, if you were to offer a word of advice to the Canadian politicians, as I say, who are losing sleep right now, about how to respond, I mean, part of it is they're looking at tit for tat responses, that there could be equal tariffs imposed on the United States

if these tariffs come into play. What word of advice would you give? I would recommend against that. I think probably it is good, it is good for Canada that Justin Trudeau is on his way off the stage because the Trudeau style, stand up strong and resistance model, frankly, I don't think holds up very well and is unlikely to produce useful results

with the Trump administration in particular. I think it's really important probably for US allies, whether it is Canada, whether it is other countries in NATO, to pause for a minute and recognize the extent to which a lot of foreign policy has been conducted on the assumption that the U.S. is going to take it upon itself to bear burdens for everybody else and recognize that that is not the starting point for U.S. policy anymore. And so ask, what is the best way to engage with and work with the United States that, you know,

obviously for Canada, the question is that's in Canada's best interest, but I would suggest humbly that what is in the best interest of Canada vis-a-vis the United States is to find a way to get along with the United States. And will that be harder than it used to be? Yes, probably, but I think that is still ultimately something that's very much in Canada's interest. I'm really glad to have the chance to talk to you, and I hope we speak again. This is not the end of this conversation, certainly. Oren, thank you very much.

No, my pleasure. Thanks for having me. Oren Cass is chief economist with American Compass. It's a conservative think tank in Washington, D.C. Also the author of The Once and Future Worker, a vision for the renewal of work in America. He also publishes a newsletter called Understanding America. I'm Sarah Trelevin, and for over a year, I've been working on one of the most complex stories I've ever covered.

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From CBC and the BBC World Service, The Con, Caitlin's baby. It's a long story, settle in. Available now. As I mentioned, many Canadians are worried about what these tariffs are going to mean for our economy and our wallets. Many Americans are also watching the clock tick

toward the 1st of February. Kevin Moyer is the owner and president of two businesses, Vermont Frames and Foam Laminates of Vermont. He relies on importing Canadian lumber for his business. He's in Starksboro, Vermont, about 20 miles south of Burlington, Vermont. Kevin, good morning to you.

Good morning. How are you today? I'm okay. How are you doing? I mean, what impact would these tariffs immediately have on your business? Yeah, I generally agree with a lot of what Orin just said, but I'd point out that America spent decades

after World War II, having learned some very painful lessons and the lead up to the Great Depression in the 1930s that tit for tat tariffs lead to ruin and sorrow for everybody. And we put a lot of time and effort into rebuilding a free and fair trade system that has led to a lot of prosperity for everybody.

So I guess point one is free trade is good. Point two is tariffs are bad. I certainly buy a lot of Douglas Fir out of Canada. It's a great timber. We love to use it and we love our Canadian partners. And if those prices have to go up 25%, that's gonna be a pretty immediate and painful experience for everybody.

What is that experience gonna look like in your shop, or shops? Yeah, at the end of the day, what we're selling is a timber frame for a home or a barn, and if that has to get more expensive to the tune of a 25% tariff, I cannot absorb that, so that's going to have to get passed on. We will just do less business. There will be less growth in America.

I won't be able to hire more timber framers, and we will do fewer projects, and everyone loses. You can't just take prices up forever. There's a limit to people's ability and willingness to pay. Are you losing sleep over this? Yeah, I definitely am. I don't want to see us forget the lessons of history and walk back down this path where we start tit for tat tariffs. But I'd also point out to your earlier question that for Canadian policymakers, it's not like they have no options or no levers to pull. The Canadian government does heavily subsidize the softwood lumber industry in Canada with below market rate harvest fees off of your public lands.

And so if you're looking for something to put on the table to get the American administration's attention that you're serious about avoiding tariffs, that's where I would start. You know, it's interesting, the president said, the United States doesn't need our lumber, that there are forests in the US. and he talked about cutting those trees down, and perhaps those trees would end up being milled, and you kind of laugh when I say that, but I wonder whether, whether... I sigh, I don't want to do that.

Yeah, no, I mean, go look at Oregon, they just locked up, they just banned logging and a whole bunch of Douglas fir forests in Oregon for environmental reasons, so we're handcuffing ourselves here in America. Yes, I could get Douglas fir out of Washington State. It would probably be more expensive and therefore our prices would go up.

It just serves nobody's interest. It serves nobody's interest. Yeah, I mean, I don't need to get Canadian timber. I can get it somewhere else, but I like my partnerships there. I like the pricing. I like the quality of the material. So It's just we're as you said earlier. We're shooting ourselves in the foot here. Let me play something for you

This is from Donald Trump's nominee for the Secretary of Housing and Urban Development Scott Turner is his name His confirmation hearing was earlier in the month here. He is speaking with a Democratic Senator Chris Van Hollen Would you agree that it would make housing more unaffordable if we further increased tariffs on lumber? Well, you know, that's the president's job and I know he's going to do everything he can to bring costs down. No, I mean, this is sort of math. I'm just asking you, there are lots of factors here, but would you agree that if you increase

the tariffs on lumber, which is a major input to the cost of housing, that increases the cost of housing? Well, I think there's a lot of increase to the cost of housing. I don't want to get into the tariffs conversation because obviously that is not my job. That's the president and your job is Congress. You're in the business of building. What goes through your mind when you hear that exchange? Yeah, housing in America is already unaffordable and it's gonna get less affordable as we do this.

I completely agree with the Senator there. This is stupid. You take the price of raw materials up that goes into housing, housing gets more expensive and fewer Americans will be able to buy houses. We will build fewer houses and there will be bigger prices on the ones we do build. And so if you were able to dial up Donald Trump

and talk to him about this, again, the clock is ticking. First of February, maybe when these tariffs come, there's talk of them perhaps coming in April as well. He thinks they're good for America. He thinks they would be good for Americans. What would you say to him? I'd say I understand where he's coming from. My grandparents were in Binghamton, New York.

You drive through parts of upstate New York, you drive through Gary, Indiana, and you see American cities and towns that have been gutted by free trade that wasn't reciprocated from the other side and manufacturing going overseas. And I think by and large, the American people are exhausted and exasperated with politicians

who cram free trade down their throats with no consideration for the millions of Americans who are gonna lose their jobs. So I think you've got a very exasperated and frustrated American people who are supporting Donald Trump in this regard, but I think it is short-sighted and self-defeating to pursue tariffs as the solution here.

The solution is knock down subsidies, get government, I think somebody said earlier, put a thumb on the scale. I want the Canadian government and the American government to take their thumbs off the scale and allow private business to compete. I love Canadian people. I think they're hardworking and smart. And I have a lot of faith that they can compete

and win in a free and fair market without government support. And the same applies to Americans. I'm really glad to have the chance to talk to you and I wish you the best of luck. Kevin, thank you very much for talking to us. Hey, thanks for having me. Kevin Moyer is the owner and president of Vermont Frames. He's in Starkboro, Vermont.