Latest Trump trade attack on EU's Airbus could hit Canada, too: Don Pittis

It's always hard to be sure whetherU.S. President Donald Trump's trade tweets are fits of piqueor official policy.

But a brand new attack on trade with Europe, including threats by the U.S. trade officeof tariffs on$11 billion US worth ofEuropeangoods, could spell a trade advantage for Canada, although that is far from guaranteed.

The damaging worldwide effects of trade tensionare beginning to pile up, leading to yesterday'sdowngrade in global growth bythe International Monetary Fund.

On North American trade,White House economic adviser Larry Kudlowplayed down Trump's recent threats to put a 25 per centtariff on cars from Mexico. The threats flew in the face of the recently signed North American trade deal. There is also concern that ratification of the freshly negotiated NAFTA2.0 deal is now in doubt.

Alfonso Esparza, a Toronto-basedcurrency and commodity analyst withonline trading company OANDA, says fears for North American trade have already hit the Canadian dollar.

"The negative effect that had on the loonieis [based on]how bad it could go," saidEsparza, who monitors the effects of international trade spats.

Cooling effect on trade and the loonie

When theU.S. began its tariffbattlewith Chinathere was some feeling that Canada could benefit. But recent trade tension with Beijing over the extradition case of Huawei executiveMengWanzhoumeans Canada did not get the trade advantage it may have hoped for.

But just as the U.S. seems to be working out its differences with China, Washington has moved on to Europe.

"The EU has taken advantage of the U.S. on trade for many years. It will soon stop!" Trump tweeted yesterday.

But this time it was clearly more thana presidential tweet. On Monday evening, U.S. trade officials had rolled out a list of $11 billion USworth of imports from the European Union, including aircraft parts, motorcycles, wine and other agricultural goods on which they would impose tariffs.

The fight is ostensibly about European Union subsidies forits aircraft industry champion, Airbus U.S.-based Boeing's only serious global competitor.

It's a long-standing dispute between the two trading giants going back more than a decade, and now Europe is looking to retaliate.

Retaliation and escalation

Some say aircraft subsidies are just an excuse for the U.S. to launch an attack on another of its longtimetrade partners in hopes of winning the kinds of advantages it sees itselfgetting in its deal with China. But Esparza says Europe has also learned from the U.S.-China dispute that it should fight back.

"OK, there's going to be retaliation. There's going to be escalation," Esparza said.

According to Airbus, Europeanofficials arecalling the penalties announced by the Office of the U.S. Trade Representativeexcessive andsay the EU will impose much bigger trade countermeasures.

In some ways the battle could be good for Canada because it has a free trade agreement with Europe. If the U.S. and Europe get into a prolonged spat, more trade could be directed to and from Canada, includingwine.

"The fact that they're going to lose that big U.S. marketmeans there might bemore pressure to be more competitive in other world markets, including Canada," saidTerry Daniel, professor emeritus at the University of Alberta's school of business.

Daniel says for the U.S. and Europe, and all the affected industries, it's a "lose-lose," as costs rise and tariffs impede the free trade that makes economies strong. The overall decline in business will inevitablyaffect Canada's economy, too.

However, with the two sides at each other's throats, Canadian businesses may have a unique advantage because they will have access to both markets.

Canada's free trade access

"With zero tariffs, we can export duty-free and we have the guaranteed market access," saidDebra Steger, a longtime Canadian trade negotiator who now teaches law at the University of Ottawa.

Steger downplays the idea that Canada is in danger of losing trade access to the U.S., whether throughNAFTA 2.0 or the originalNAFTA that remains in force, meaning Canada will continue to have tariff-free access to both of the battling giants.

But she says smaller economies like Canadashould be wary when their bigger partners start fighting over trade.

"These kind of fights between the big guys are not good for the world generally," she said.

And rather thanwinning a trade advantage for Canadian exports, Canada, with its tariff-free access, could insteadbecome a dumping ground for the products that the two trading countries normally sell to one another.

Follow Don on Twitter @don_pittis