CANADA braced for economic turmoil and announced retaliatory trade measures after President Donald Trump signed an executive order imposing 25 per cent tariffs on almost everything the US imports from the country, and 10 per cent on energy.
Prime Minister Justin Trudeau said Canada will respond by placing 25 per cent counter-tariffs on C$155 billion (S$144 billion) worth of American-made products. That will include tariffs on C$30 billion worth as of Tuesday (Fed 4), with the rest coming later in February, to allow Canadian companies to adjust their supply chains and find alternatives.
Mexico has also announced retaliatory measures, while China is turning to the World Trade Organisation (WTO), after Trump followed through with his threat to impose stiff tariffs on the US’ largest trading partners.
American beer, wine, food and appliances will be among the many items subject to Canadian tariffs, and the country is also considering measures related to critical minerals, Trudeau said. He encouraged Canadians to buy locally made products and skip US vacations.
The US is by far Mexico’s most important foreign market, while Mexico in 2023 overtook China to become the top destination for US exports.
Mexico has been preparing possible retaliatory tariffs against imports from the US, ranging from 5 to 20 per cent, on pork, cheese, fresh produce, as well as manufactured steel and aluminium, according to sources familiar with the matter. The auto industry would initially be exempt, they said.
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US exports to Mexico accounted for more than US$322 billion in 2023, Census Bureau data showed, while the US imported more than US$475 billion worth of Mexican products.
Before announcing Canada’s counter-measures, Trudeau invoked the shared history of the two neighboring countries, including their longstanding security and military alliances.
“From the beaches of Normandy to the mountains of the Korean Peninsula, from the fields of Flanders to the streets of Kandahar, we have fought and died alongside you during your darkest hours,” Trudeau said, addressing Americans directly on Saturday night.
“Yes, we’ve had our differences in the past, but we’ve always found a way to get past them. As I’ve said before, if President Trump wants to usher in a new golden age for the United States, the better path is to partner with Canada, not to punish us.”
Trump’s executive orders invoked emergency powers to justify tariffs starting at 12:01 a.m. Washington time on Tuesday, blaming Canada and Mexico for insufficient action to curb the production and trafficking of fentanyl, the powerful synthetic opioid that has led to hundreds of thousands of deaths in North America.
Trump’s emergency declaration means he won’t wait for formal procedures outlined in the US-Mexico-Canada Agreement, which the president signed in 2020 and hailed as a “colossal victory” in an update to the North American trade deal that was crafted in the early 1990s.
Trump’s order included a clause setting out even higher duties if Canada retaliates, which its leaders have pledged to do in a way that aims to insulate Canadians and pressure Americans.
“Trump’s tariffs will devastate our economy,” said Doug Ford, leader of Ontario, Canada’s most populous province and the home to an automotive industry that’s tightly integrated with the US and Mexico.
Other Canadian officials announced their own measures. David Eby, the premier of British Columbia, directed the provincially owned liquor distributor to remove some alcohol brands made in Republican-led states from the shelves of retail stores – and to cease further purchases. The province will adopt a Canada-first policy for all government procurement, he said.
“President Trump’s 25 per cent tariffs are a complete betrayal of the historic bond between our countries and a declaration of economic war against a trusted ally,” Eby said.
Rapid impact
Business groups expressed outrage and dismay to Trump’s order. The Canadian Chamber of Commerce said it was a “profoundly disturbing” decision and will “drastically increase the cost of everything for everyone.”
Linda Hasenfratz, executive chair of auto parts manufacturer Linamar, said in an interview before the announcement: “It will lead to markets collapsing, sales dropping, layoffs, all the things that President Trump doesn’t want.” Linamar operates in all three USMCA countries.
“The impact is going to be rapid, in terms of our customers on the auto side. I just don’t think they can sustain production, which in turn has a pretty immediate impact on our production levels.” The US is by far Canada’s most important market for exports.
The US had a trade deficit in goods with Canada of about US$55 billion in the first 11 months of last year. The US exported US$320 billion worth of products to Canada and imported US$375 billion. Crude oil is the biggest reason for the gap – excluding energy, the US had a trade surplus with Canada.
Pierre Poilievre, leader of the Conservative Party, which is ahead in public opinion polls, called for a “Canada First” dollar-for-dollar retaliation against the US, echoing Trump’s “America First” slogan.
Poilievre said income from Canadian tariffs should be earmarked for supporting workers and businesses, alongside tax cuts, expanding energy and trade infrastructure, and investing in its military and borders.
A softwood lumber trade group in British Columbia decried what it called “a punitive, unjustified protectionist measure” and said Trump’s tariffs will increase building costs at a time when affordability is already a concern for Americans. The new tariffs add to existing duties already imposed by the US.
Danielle Smith, premier of Canada’s oil heartland of Alberta, took partial credit for the lower 10 per cent tariff on energy and reiterated her opposition to restricting or taxing Canadian energy exports in retaliation. BLOOMBERG, REUTERS
