Canadians were shocked by the announcement at the weekend that the United States would impose a 25 per cent tariff on most imports from Canada and Mexico, just as they were astonished by Donald Trump’s earlier pledge to use ‘economic force’ to absorb Canada into the US.
Trump’s last-minute decision to delay the implementation of these tariffs for 30 days brought a measure of relief. To win this reprieve, Canada expanded its existing plans to strengthen security at its own border and to combat the trade in fentanyl and money laundering.
However, the danger of a tariff war still looms. President Trump has repeatedly praised tariffs as ‘beautiful’ multipurpose instruments that can stimulate domestic manufacturing and generate vast revenues for the US Treasury. In January, he also used the threat of tariffs to persuade Colombia to accept military flights carrying deportees.
Canada has demonstrated its willingness to negotiate and will seek to extend the delay beyond 30 days or resolve the disagreement entirely. But its response at the weekend indicated that it is prepared to retaliate against tariffs too, which may have given Trump pause. His threats appear to have activated a latent but powerful nationalism in Canada.
Canadian resolve
President Trump has often repeated his call for Canada to become the ‘51st state’. Such statements, coupled with threat of ‘economic force’, have been received by most Canadians not as an invitation but as an assault on Canada’s economy and sovereignty.
Canadian Prime Minister Justin Trudeau, set to resign when his Liberal Party selects a new leader, captured this public mood in a televised address at the weekend, responding to Trump’s tariff threat. ‘We didn’t ask for this,’ he said, ‘but we will not back down’. He then announced that, if US tariffs were introduced, Canada would impose 25 per cent tariffs on C$155 billion worth of US imports – a larger amount that some initially expected.
The two leading candidates to replace him as Liberal leader – former Bank of England governor Mark Carney and former deputy prime minister Chrystia Freeland – expressed support for retaliatory tariffs. So did Pierre Poilievre, the leader of the opposition Conservative Party, which is ahead in the polls in advance of an election later this year. The leaders of Canada’s provinces, hitherto divided, also voiced their approval. Ordinary Canadians shared lists of US products to boycott.
Now that the immediate threat of US tariffs has lifted, Canadians’ disbelief and fury has been tempered by relief and uncertainty about what might come next. Some economists forecast that, if imposed, US tariffs would drive the Canadian economy into recession within five or six months. Significant job losses would also be expected, including up to 100,000 in Quebec alone, according to that province’s leader.
US vulnerabilities
The US economy is both ten times larger and less dependent on trade than Canada’s, and better positioned to withstand a prolonged tariff war. But Canada is not defenceless. Officials in Ottawa are conscious of Trump’s political vulnerabilities, including his commitment to keeping consumer costs low for Americans, and his devotion to US states, regions, and sectors that have provided him with political support.
Canadian policymakers designed counter-tariffs with these vulnerabilities in mind. Because Canada is the principal export destination for 34 US states, Ottawa has ample opportunities to target its own retaliatory tariffs with precision. (Even without these countermeasures, Trump’s now-suspended 25 per cent import tariff would cost the typical US household $1,200 per month, according to Yale University’s Budget Lab).