Excuse the rant…this isn’t about politics, it’s about economics.

Editor’s Note: The views and opinions expressed herein are those of the writer and may not be the opinions of Beaumont Capital Management (BCM). 

With all due respect to our President, I vehemently disagree with him on the use of tariffs. As the administration charges on with the trade war, they continue to cite our trade deficit with Canada as a catalyst/driving force. “Fake news” aside and contrary to the President’s statements, as we wrote in our white paper on trade back in June, we actually have a trade SURPLUS with Canada. President Trump has been citing our trade numbers for Goods only, and the omission of Services skews the numbers and obfuscates the truth. 

In the past, as the chart below shows, we’ve had deficits. The causes are often circumstances beyond any politician’s control, such as currency fluctuations over time or interest rate levels. Forcing the Canadians out of NAFTA in the name of unfair U.S. demands doesn’t compute.

As a college student taking a Canadian studies class, I had the incredible privilege of visiting Ottawa during the initial negotiations on NAFTA in 1990.  We met with the U.S. Ambassador to Canada, had lunch with both the Canadian majority and minority leaders of Parliament, as well as members of both sides’ negotiating teams.  It was fascinating, and in my humble opinion, the NAFTA agreement is not only fair, but has provided a foundation for three nations and an entire continent to benefit from the free movement of ideas, people (labor), capital, goods and services. These benefits are the very same tenets the Europeans created in the formation of the European Union. NAFTA provides protection of intellectual property and the rule of law. It provides multi-national companies the opportunity to thrive. At home, it provides countless jobs and opportunity.

Tariffs, trade wars and bluster can destroy more wealth, opportunities and jobs than we can fathom.  Study history and what happened the first and last time we, the United States, implemented broad tariffs (or just see my short white paper). Under Smoot-Hawley, global trade shrank by two thirds in five or six years. Two-thirds! It certainly contributed to the great depression, and helped set the foundation for extreme ideologies beyond imagination.

Forget politics, this is about economics. This is about avoiding a repeat of the past. The fear of a trade war is currently the main contributor to why many developed and emerging economies’ GDP growth, bond, currency and stock markets are falling precipitously. This is not a joke, a drill or “fake news”. It is time for us all to stand up and speak up about what does not work so we can get back to repairing global trade and growth…before it is too late.

“Those who do not study history are doomed to repeat it.”—Winston Churchill.