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Prime Minister Justin Trudeau is not open to lifting Canada’s full package of retaliatory tariffs if US President Donald Trump leaves any tariffs on Canada in place, according to a senior Canadian government official.
Trudeau’s government is cool to the idea of a “middle ground” settlement in the trade war floated by US Commerce Secretary Howard Lutnick. In particular, any scenario where Canada has to fully rescind its retaliatory tariffs in return for a partial rollback of American tariffs will be rejected by the Canadian prime minister, said the official, speaking on condition they not be identified.
The Trump administration imposed 25% tariffs on US imports of Canadian goods, with the exception of energy products such as oil and natural gas, which have a 10% rate. Trudeau’s government responded with counter-tariffs against C$30 billion ($20.8 billion) in American products, including cosmetics, tires, fruit and wine.
The Trump administration said Wednesday it’s exempting automakers from those tariffs for one month under the US-Mexico-Canada agreement, the regional trade agreement that he signed in 2020.
Source: Statistics Canada, Bloomberg calculations
Canada’s counter-tariffs will expand to an additional C$125 billion in items from US exporters later in March. The second phase includes a huge array of categories — including US-made cars and trucks, aluminum, and a long list of food and agricultural products.
Lutnick told Bloomberg TV earlier on Wednesday that Trump is considering tariff relief for particular sectors, possibly including automotive.
“There are going to be tariffs — let’s be clear — but what he’s thinking about is which sections of the market that maybe he’ll consider giving them relief until we get to, of course, April 2,” Lutnick said. “I think it is going to be in the middle somewhere.”
Lutnick said the US actions are not a trade war, but a “drug war” meant to stanch the flow of fentanyl into the US and to bring down America’s rate of overdose deaths from the drug.
But Trudeau has rejected that premise, pointing to US border agency statistics that show very small amounts of the drug are found by agents at or near the Canada-US border.
In December, Canadian officials announced C$1.3 billion in new border surveillance and security measures, and Trudeau has since added to it by devoting more money to the policing of organized crime and appointing a longtime senior cop as the country’s “fentanyl czar.”
Source: US Commerce Department
“The excuse that he’s giving for these tariffs today of fentanyl is completely bogus, completely unjustified, completely false,” Trudeau said Tuesday in Ottawa. “What he wants is to see a total collapse of the Canadian economy because that’ll make it easier to annex us.”
Trump and Trudeau spoke by phone on Wednesday and afterward the president made clear the enmity that exists between the two men.
Trump again called Trudeau “governor” and said that “he largely caused the problems we have with them because of his Weak Border Policies.” Trump also wrote: “He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power.”
Canada uses the parliamentary system and doesn’t have fixed election dates, though an election must take place at least every five years. Trudeau has announced his resignation, his successor will be chosen March 9, and the prime minister will leave office in the days after that. A national election is likely to happen within months.
‘Never Trust’ Again
In addition to the Trump-Trudeau call, Lutnick spoke with Canadian Finance Minister Dominic LeBlanc, and Secretary of State Marco Rubio had a call with Foreign Minister Melanie Joly, according to Joly, who made it clear that the government wasn’t willing to give concessions for nothing.
“We will never negotiate against ourselves,” Joly told reporters in Toronto.
“It’s not true that we will go through this psychodrama every 30 days,” she said. “So our goal is to make sure we’re having conversations to bring back much more certainty” to trade.
Canadian Energy Minister Jonathan Wilkinson said Trump’s actions have permanently damaged the relationship between the two countries, who have a long history of deep partnership.
“Even if the tariffs are withdrawn, we will never go back to where we were three months ago,” Wilkinson said, speaking at an event in Toronto. “We will never trust the Americans in the same way that we did.”
— With assistance from Monique Mulima, Erik Hertzberg, Randy Thanthong-Knight, and Melissa Shin
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