The Canadian government announced the sweeping of a broad package of counter-tariff measures against US goods after President of the United States Donald Trump said on Tuesday, March 4, that Washington would go ahead in the framework of imposing levies against Ottawa and Mexico City.
Canadian Prime Minister Justin Trudeau said late on Monday, March 3, that the country would not leave the unjustified decision of the United States on tariffs unanswered. In this case, the response plan is the same as the one that Mr. Trudeau announced last month after the US president signed an executive order on broad tariffs.
The first stage of the process of tightening Ottawa’s trade policy towards Washington provides for immediate 25% levies on goods imports from the United States. The relevant measures relate to products worth C$30 billion ($20.6 billion). Three weeks after the mentioned decision came into force in the practical plane, Canada intends to impose 25% tariffs on goods worth C$125 billion. As part of the second round of tightening Ottawa’s trade policy towards Washington, measures are envisaged for big-ticket items such as cars, trucks, steel, and aluminum.
Justin Trudeau said that tariffs from Canada will remain in effect until similar measures imposed by the United States are withdrawn, and should US duties not cease. Also, according to him, active discussions are currently underway with provinces and territories on several non-tariff measures.
It is worth noting that the retaliatory actions on the part of Ottawa are not something sensational and do not belong to the category of surprises. Many experts warned about the maximum likelihood of appropriate measures after Donald Trump said that Canada and Mexico have no way to avoid broad tariffs.
In fact, a trade war is currently starting. It is possible that at some point the parties will agree to de-escalate the economic confrontation, but so far a clearly negative scenario is being implemented. In the context of tensions between Ottawa and Washington, there is a risk of fundamental degradation of one of the world’s largest bilateral trade relationships, with an annual turnover of goods and services exceeding $900 billion. Canada is the largest single buyer of products from the United States. It is worth noting that the corresponding situation is typical in the opposite direction of these bilateral relations.
Against the background of news about tariff measures, the Canadian dollar and stocks showed a decline. The benchmark S&P/TSX Composite Index dropped 1.5%. This is the most significant drop since December 18. Traders in overnight swaps increased bets that the Bank of Canada will cut interest rates by 25 basis points at the meeting scheduled for March 12, rising to nearly 80% from about a coin flip.
Donald Trump’s executive order, signed on February 1, imposes 25% tariffs on most of what the United States imports from Canada and Mexico. Also in this case, 10% levies were provided for Canadian energy products such as crude oil, natural gas, and uranium.
The Bank of Canada has warned that a prolonged trade war could potentially chop the country’s output by almost 3% within two years and wipe out economic growth. It was also noted that the demand for Canadian goods in the United States would suffer, exporters would cut production and jobs, prices for products imported from the US would rise, and consumers and businesses would spend less.
Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, said businesses on both sides of the border have already been affected due to the uncertainty surrounding Donald Trump’s tariff threats. In this context, it was also noted that there is a long way to go to ensure that Canada and the United States become trusted economic partners again. Matthew Holmes stated that businesses cannot simply switch their whole model to avoid tariffs and then go back again depending on what the politicians decide on one day or another.
Donald Trump’s executive action alleged that Canada allows too much fentanyl to be flowed over the border. Canadian officials have denied these claims. In the relevant context, they refer to data from the United States government, according to which less than 1% of illicit opioids seized by US border agents are found at or near the northern crossing.
It is also worth noting separately that Ottawa has announced a plan to beef up border security by intensifying aerial surveillance with helicopters and drones. The government of Justin Trudeau will spend C$1.3 billion on appropriate measures. The mentioned plan also contained a statement on the formation of a new North American joint strike force to tackle the fentanyl trade. Moreover, Justin Trudeau has appointed a so-called fentanyl czar and increased the number of personnel available to patrol the border. Apart from that, he promised further measures to crack down on organized crime.
The provinces of Canada are also ready to retaliate against the United States. Ontario Premier Doug Ford said at a mining convention in Toronto on Monday that tariffs for Canada are taxes for Americans. He declared his readiness to do everything in response to potential attempts by the US to annihilate the mentioned province. According to him, as part of the appropriate measures, a decision may be made to cut off the energy supply. Doug Ford also called on the rest of Canada’s provinces to do the same.
Moreover, Ontario and other regions of Canada have promised to restrict or shut out US companies from government contracts. Doug Ford has announced his province’s intention to end its contract with Starlink, the satellite network controlled by Elon Musk. He also noted the willingness to stop nickel exports to the United States. According to him, the implementation of the relevant measure will cause the shutdown of production. In this context, it was separately noted that 50% of the nickel used by the United States is coming out of Ontario. Doug Ford talked about this during a conversation with media representatives.
According to media reports, in recent weeks, Canadian cabinet ministers, provincial premiers, and other politicians have repeatedly tripped to Washington. During the relevant meetings with US officials, among other things, issues related to the border were discussed. Canada’s representatives also urged United States lawmakers and members of Donald Trump’s team not to impose tariffs. These negotiations were described as positive, but at the same time, Washington’s tightening trade policy and retaliatory measures from Ottawa were not canceled.
Canadian Immigration Minister Marc Miller said on Monday that there is no question that tariffs will be painful for the country’s economy. According to him, Ottawa will have to bring the fight, and this will hurt the Americans. He stated that it is important to reiterate that 35 of those states, their primary trading partner is Canada, so it will hurt them. Marc Miller also expressed the hope that logic will prevail.
As we have reported earlier, Canada’s Economy Demonstrates Growth.
