- Order for April 1 border review came with Feb. 1 tariff threat
- Canada prime minister supports ‘dollar-for-dollar’ retaliation
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US President Donald Trump is trying to create uncertainty in his trading partners to knock them off-balance and weaken their negotiating position, Canadian Prime Minister Justin Trudeau said.
Trump caused volatility in markets by signaling Monday evening that his administration might impose tariffs of as much as 25% on Mexico and Canada as early as Feb. 1. That timeline appeared to conflict with an he signed that directed US officials to review trade and border relationships and report back by April 1.
“We know that there is always going to be a certain amount of unpredictability and rhetoric coming out from this administration,” the prime minister said Tuesday in Quebec. Trump is a “skilled negotiator and will do what he can to keep his negotiating partners a little off balance,” Trudeau added.
Mexican President Claudia Sheinbaum struck a similar note, telling reporters: “It’s important to always keep a cool head and refer to the signed orders beyond the actual rhetoric.”
A worker at a car dealership in Montreal. About half of the vehicles sold in Canada by dollar value are manufactured in the US. Photographer: Christinne Muschi/Bloomberg
Trudeau, who is set to leave office in March, said his government is prepared to “support and compensate” Canadian citizens and businesses if Trump proceeds with tariffs that harm the economy. But he also promised strong retaliation measures.
The Canadian government has prepared a number of tariff lists against US-manufactured items depending on what Trump does. If the US proceeds with tariffs that are targeted on a limited range of Canadian goods, Trudeau’s plan is to place tariffs on a relatively small number of US items — including consumer products.
If Trump moves ahead with broad 25% tariffs, however, Canada has a much longer list of items for retaliation, worth C$150 billion ($105 billion) in US-made items across a broad range of categories, including , Bloomberg News last week.
But retaliation would come at a heavy cost for Canada, too, pushing up costs for its consumers and businesses and worsening the economic blow.
In 2019, the Bank of Canada a scenario in which the US applies 25% tariffs and faces an equal response from affected trading partners. Canada’s GDP would take a 6% hit, a bigger drop in GDP than in any recession excluding the downturn that coincided with the Covid-19 shock, and the loonie would also depreciate by 25%, the bank estimated at the time.
The US runs a trade surplus with Canada in many industries, , but overall it has a trade deficit because it imports so much Canadian oil and gas.
“Everything is on the table, and I support the principle of dollar-for-dollar matching tariffs,” Trudeau said, reiterating that he hopes to avoid a trade war.
Mark Carney, who’s running to replace Trudeau as Liberal Party leader and prime minister, called Trump’s outlined tariffs “illegal” and said he supports dollar-for-dollar retaliation. Chrystia Freeland, the former finance minister who is Carney’s main rival in the race, has taken a similar position.
The Canadian dollar, which plunged Monday evening after Trump’s comments, recovered most of those losses on Tuesday to trade at C$1.4338 per US dollar as of 2:55 p.m. in New York.
Winning Together
Canadian resources, including oil, steel and aluminum, can instead be used to fuel Trump’s vision of faster US economic growth and a stronger manufacturing base, Trudeau said.
“We’ve been here before,” he said, referring to Trump’s first term. “Our focus is on the substance of things, where Canada and the US do well when we do things together.”
The Canadian Chamber of Commerce will “take the President’s comments seriously, but not always literally,” Matthew Holmes, the group’s chief of public policy, said by email.
“We were ready today, and we will be ready on Feb. 1. For now, we will keep making Canada’s case every day, to convince Americans that we win bigger together.”
What’s more, one expert said, Trump would find it impossible to fulfill all his promises at once, if he follows through on his tariff plan.
“Trump can’t fill the strategic petroleum reserve, sanction Venezuelan and Iranian oil, put a 25% tariff on Canada, ramp up demand for gasoline and gasoline-powered cars, and lower the cost of living for Americans,” Heather Exner-Pirot, a senior fellow at the Macdonald-Laurier Institute think tank, said by email.
Danielle Smith, Alberta’s premier Photographer: David Kawai/Bloomberg
“It will never stop being in the interest of the United States to have unfettered access to Canadian oil and gas. This too shall pass.”
Alberta, Canada’s top-oil producing province, has complicated the prime minister’s message by breaking ranks and openly his approach to leaving all options open.
Alberta Premier Danielle Smith has said it’s a bad idea to threaten to curb Canada’s energy exports to the US or to levy export taxes against Canadian natural resources that would drive up prices for American consumers and businesses.
Canada is the largest external supplier of crude oil to the US, providing some 4 million barrels a day, the vast majority of it sent from Alberta via pipeline.
“If there’s a failure, the failure lands at the feet of Justin Trudeau, who damaged the relationship with the incoming president by his antics in the first round of negotiations,” Smith said during a virtual news conference Tuesday.
“It’s up to us to demonstrate how we can get a double win here,” Smith said. “And I think it’s a double win for us to sell more to the United States, buy more from the United States, have a joint energy security strategy that leads to a national and international security strategy.”
— With assistance from Laura Dhillon Kane and Erik Hertzberg
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