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Anil Wasif: The real reason for Donald Trump’s tariffs 

Commentary

President Donald Trump at the White House, Jan. 29, 2025, in Washington. Alex Brandon/AP Photo.

Understanding why the Trump administration has embraced tariffs is key to developing our response

The main questions are asking in aftermath of President Trump’s announcement of sweeping tariffs on Canadian imports into the United States is: why?

His administration has provided various explanations in recent days—everything from fentanyl to our trade balance to calls for Canada to become the 51st state. But none of them are quite persuasive or proportionate.

For those Canadian policymakers looking to make sense of real motivation behind Trump’s tariffs, they should consult an obscure yet important policy paper released days after the November presidential election. The paper, entitled “A User’s Guide to Restructuring the Global Trading System,” sets out an ambitious plan for reconceptualizing global trading arrangements using tariffs as a key policy weapon. Its author, Stephen Miran, has since been nominated as the chair of Trump’s Council of Economic Advisers.

In the paper, Miran argues that the Bretton Woods system, which established institutions like the IMF and World Bank, is being exploited to undermine U.S. interests. He sets out the case that tariffs are a powerful tool to restore American economic dominance. As he puts it: “Tariffs and currency policy are aimed at improving the competitiveness of American manufacturing, increasing our industrial plant, and reallocating aggregate demand and jobs from the rest of the world stateside.”

Trump’s plan

From these underlying assumptions, one can begin to see the contours of the Trump administration’s grand plan to reshape global trade in two phases. Phase one starts with phased tariffs to generate revenue, boost domestic production, and gain negotiating leverage—a tactic Miran praises from the 2018-2019 U.S.-China trade talks. Gradual implementation, Miran points out, minimizes disruptions, while currency depreciation in tariffed countries offsets inflation for U.S. consumers.

The second phase involves currency adjustments to address trade imbalances, modeled on the 1985 Plaza Accord. Back then, the U.S., Japan, Germany, France, and the U.K. collaborated to devalue the U.S. dollar and enhance American export competitiveness. Miran proposes a Mar-a-Lago Accord” to shift to a unilateral approach, using tariffs and security agreements to pressure partners into supporting dollar devaluation.

The purpose of these two phases—starting with tariffs and introducing gradual current adjustments—is to manage the challenges of rising U.S. debt, less cooperative trading partners like China, and inflation risks.

Miran also emphasizes reducing inflation through deregulation and energy-cost reductions while using tools like the International Emergency Economic Powers Act (IEEPA) to discourage foreign reserves of U.S. dollars. This framework aims to reorient global demand toward U.S. manufacturing while maintaining market stability and addressing geopolitical complexities. Trump’s recent tweak at Davos to his catchphrase—“America First does not mean America Alone”—communicates Miran’s vision.

The theory of change on display here sequences tariffs and currency policy to reassert U.S. economic primacy while leveraging broader economic and geopolitical dynamics. It’s a bit wonky but it’s worth unpacking.

Tariffs serve as an initial policy lever, generating revenue and boosting domestic manufacturing by making foreign imports less competitive, with Miran arguing that currency markets—if left to adjust—would mitigate inflationary risks through depreciation in tariffed economies. As trade partners respond, a broader currency realignment is set in motion, devaluing the U.S. dollar to enhance export competitiveness while discouraging excessive foreign reserves of U.S. assets (like the Plaza Accord).

Miran thinks this would recalibrate global demand toward American industries and reinforce supply chain shifts away from China, all while maintaining financial stability through deregulation and energy cost reductions. The underlying bet is that America’s consumer market and financial system are indispensable enough to extract concessions from allies and competitors alike, securing long-term trade advantages, and entrenching U.S. dominance in a reshaped global order.

Canada’s response

Understanding the administration’s threat of tariffs in these broader terms has big implications for Canadian policymakers. Over the weekend, the federal government announced retaliatory tariffs on more than $150 billion in U.S. goods. Yes, projecting strength is important, but our efforts must shift from symbolic gestures and election posturing to a coherent trade strategy that addresses the realities of a recalibrated U.S. trade agenda.

Canada must move beyond tit-for-tat retaliation and focus on the larger strategy at play. Trump’s negotiation style thrives on disruption, treating even close allies as negotiable. His recent confrontation with Colombia—threatening 25 percent tariffs before extracting concessions—highlights how he uses economic coercion to reset relationships on his terms. To add to this, Everett Eissenstate, another ex-officio from Trump’s first National Economic Council publicly stated: “There needs to be a recognition that things are changing and the dynamics that we have been involved in for decades—those rules don’t apply anymore.”

The message from Washington is clear: America’s new approach disregards historical norms, instead favouring a transactional framework that intertwines trade and strategic policy objectives. This creates a challenging environment where traditional alliances are unfairly deemed as less relevant, and every issue becomes a bargaining chip. For Canada, this entails addressing bilateral trade issues that go beyond counter-tariffs.

The good news is that those priorities aren’t a mystery. They’ve been outlined for decades in the annual United States Trade Representative (USTR) report, spanning administrations from Clinton to Obama, through Trump’s first term, and even Biden.

Add to this a January 14th Congressional Research Service (CRS) report which highlighted key trade issues between the U.S. and Canada. These include disputes over six key issues: the Digital Services Tax, Online News Act, Online Streaming Act, agriculture and dairy tariffs, automotive rules of origin, and critical minerals collaboration.

Additionally, unresolved softwood lumber duties and longstanding legal battles remain persistent irritants. These disputes reflect broader tensions within the evolving global trade landscape.

The emerging trade environment under Trump’s administration presents a dual challenge: addressing longstanding disputes while adapting to unprecedented, Trump-specific challenges.

Considering the CRS list of trade disputes, Miran’s trade framework, Canadian policy dynamics, and recent appointments to the U.S. administration, there are critical factors for negotiators to consider. The early signals suggest that a renegotiation of the CUSMA could come sooner than 2026.

Miran’s appointment, along with others like Jameson Greer, points to an aggressive trade posture emphasizing enforcement and unilateralism. Understanding the philosophies driving these figures—including tariffs as leverage and a preference for bilateral agreements—offers insight into future U.S. demands and direction.

Canada’s negotiators must address legacy resource disputes while tackling newer challenges including digital trade and platform governance. Policies such as the Digital Services Tax must be reviewed to avoid perceptions of discrimination, particularly as Silicon Valley aligns with U.S. interests under Trump.

Strengthening trade relationships with Europe and the Asia-Pacific through agreements like CETA and CPTPP will reduce Canada’s reliance on the U.S. and provide alternative platforms for resolving disputes.

Finally, framing solutions as wins for Trump will be key. His focus on optics and tangible outcomes means proposals addressing shared interests—like critical minerals for electric vehicles—must be positioned as victories for his administration. However, Canada must balance this approach carefully to avoid compromising sovereignty and long-term policy independence.

Navigating these complexities with clarity and foresight is vital. A good place to start is Miran’s paper to understand the real nature of the administration’s trade strategy.

Anil Wasif

Anil Wasif is Manager of Research at Infrastructure Ontario. He sits on the advisory board of the Max Bell School at McGill University and the Governing Council at the University of Toronto. He is Trustee and Director of Strategy at BacharLorai and is its Official Civil Society Representative to the United Nations and…...

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