Recently elected US President Donald Trump has had a very busy Spring Break — unlike most of us. Indeed, the much-feared tariff war has finally ensued. However, it seems to have lasted a whole three days before President Trump walked back on his threat by announcing a one-month exemption on most of the tariffs, yet again.
On March 4, Trump activated a blanket 25 per cent tariff on imports from Canada and Mexico encompassing virtually all goods. A primary aspect of President Trump’s campaign was the promise of a better economy and lower inflation, but the economic impacts of these tariffs seem to contradict this. Americans and Canadians alike have growing concerns about Trump’s tariff war as duties of this magnitude inevitably lead to higher prices, raising the cost of virtually every good in both Canada and the US.
Economists have warned for years that tariffs and anything short of free trade inevitably lead to inefficient allocation of resources and marginally worse outcomes. Trump’s tariffs will make most Canadian goods less competitive by making them more expensive. American importers will now have to pay the US government a 25 per cent levy to bring them into the country.
Tariffs lead to higher costs for manufacturers to acquire materials such as steel, agricultural products, machinery, energy, and building materials. To retain profit margins, these costs are, more often than not, passed onto the consumer. This leads to rising prices for everything that crosses the border: groceries, cars, houses, electricity, gas, and more.
The US and Canada have been allies from their very formations and are intimately woven together in trade. “A tariff war has no winners,” former Canadian Prime Minister Trudeau stated after the activation of the tariffs.
What are President Trump’s goals with this economic war? He has stated multiple times that the tariffs will pressure Canada to secure its border and stop the “flow of fentanyl” into the country. However, statistics show that flows of fentanyl into the US from Canada account for less than one per cent of all fentanyl seized. Moreover, since January, the Canadian government has implemented a 1.3 billion dollar border plan that includes adding 10,000 border security personnel workers and appointing a “fentanyl tzar” — but this did not stop President Trump from enacting the tariffs.
Other potential reasons have been mentioned across Trump and Elon Musk’s X accounts: protecting national industries, growing American manufacturing, or even blatantly crippling the Canadian economy to better annex it as the 51st state.
Canada has made its feelings clear on what Trudeau called a “completely bogus and … unjustified” trade war. In response to Trump’s tariffs, Trudeau announced an equivalent 25 per cent tariff on 30 billion dollars’ worth of American goods and promised to tariff another 125 billion dollars of goods if the president did not cease his actions in the next three weeks. Later that day, President Trump posted on X further threatening Canada, saying that he will match any retaliatory tariffs: “Please explain to Governor Trudeau of Canada, that when he puts on a retaliatory tariff on the US, our reciprocal tariff will increase by a like amount!”
An inspiring wave of unity has overtaken Canada and its people from coast to coast. The federal government, provincial governments, and citizens are coming together to boycott US products and buy local. As the US’s largest alcohol trading partner, Canada has begun to pull American booze off the shelves. Unlike tariffs, this measure will have no economic impact on Canadians and instead directly decrease the sales of American liquor companies, who will then lobby against the tariffs. Politicians from all parties are uniting in a call of resistance, urging Canadians to never back down when facing a “bully.”
Further resistance from Canada ensued on March 6 when Ontario Premier Doug Ford announced that come March 10, a 25 per cent surcharge on electricity would be added to power exports to Minnesota, Michigan, and New York, should Trump continue with his actions. Trump has already acknowledged the US’s dependence on Canadian electricity by placing a lower 10 per cent tariff on energy imports from Canada. Indeed, the US is a net importer of energy from Canada, buying around 50 per cent more than it sells to its neighbour. The ten per cent tariff already in place, topped with Ford’s proposed 25 per cent surcharge, would lead to a 35 per cent increase in the cost of electricity for the approximate 36 million Americans residing in the states affected — a devastating increase for lower-income households.
The growing resistance to this unwarranted economic attack on Canada may have prompted President Trump to rethink his course of action: not 20 minutes after Ford’s announcement, Trump announced a one-month exemption on all tariffs affecting products that comply with the Canada-US-Mexico Agreement (CUSMA). While only affecting around half of the products originally tariffed and not retroactive — meaning all taxes paid between Tuesday and Thursday are not refundable — this still gave many industries, especially the auto and agricultural industry, a sigh of relief.
On March 7, Trump threatened to levy a 250 per cent tariff on dairy products from Canada, citing Canada’s own 241 per cent tariff on US dairy imports as a “rip-off.” However, Canada’s tariff primarily protects Canadian farmers; as dairy is a very minor export to Canada, this economic measure stands to have minimal effect on either country.
Trump also stated that he wishes to place tariffs on Canadian lumber. However, experts in the US say increasing lumber costs could have devastating effects on the American economy, resulting in increased construction and housing costs. Economists and home-builders caution that the US does not have the necessary industrial capacity to meet the demand for lumber through American resources alone.
The stock market has reacted negatively to the tariff war; the S&P 500 has plummeted by about four per cent in the past week.
President Trump’s aims remain unclear and his current proposed actions stand to hurt Americans just as much, if not more, than Canadians. With the uncertainty of more tariffs looming in the coming months, the effect on both economies remains unknown. While the world holds its breath as it watches two long-standing allies bicker, one thing remains certain: we have entered a new era for international relations between Canada and the United States. President Trump has tarnished the trust that has made our neighbouring countries prosper for over two centuries.
Editor’s note: This article was written before Premier Ford and President Trump stepped back from their threats of 25 per cent tariffs on US imports of Ontario electricity, and 50 per cent tariffs on Canadian steel and metal imports, respectively. As of the time of publication, the Canada-US trade spat is still rapidly developing.