
New U.S. Tariffs: What It Means for Canadians
During the first two weeks in office, President Donald Trump’s administration released many policies impacting areas like immigration, labor, and cross border tariffs, as well as making bold claims such as taking over and owning the Gaza Strip. Trump's return to the White House have caused investment uncertainty and political upheaval. With so much information to pour through, we are going to focus on potential tariffs affecting our country and how to make sense of how this all may affect the global economy.
The Tariff Timeline So Far
February 1, 2025
U.S. President Donald Trump issued an executive order to impose 25% tariffs on goods imported from Canada. Energy resources would be subject to slightly lower tariffs of 10%, according to the order. The U.S. tariffs were to take effect on Tuesday, February 4, 2025.
February 2, 2025
The Canadian government issued its response, with Prime Minister Justin Trudeau announcing in retaliation that Canada will impose 25% tariffs against $30 billion worth of American goods on Tuesday, February 4, 2025. Tariffs on an additional $125 billion worth of American goods were to take effect three weeks later.
February 3, 2025
The U.S. and Canadian governments announced a 30-day suspension on tariffs. As part of the agreement, Canada has pledged to improve security along the U.S.-Canada border at a cost of at least $1.5 billion.
The 30-Day suspension is a positive development in what’s been an unsettling and very confusing situation. It demonstrates that both countries are willing to negotiate and gives the two countries a chance to consider the implications of a trade war and hopefully reach an agreement that both are happy with.
Who would pay these tariffs?
Tariffs are paid by the companies who import foreign goods — not the exporting countries. The U.S. companies that import Canadian goods will pay the tariffs announced by Trump. Canadian companies will pay the tariffs announced by Trudeau.
Companies often raise their prices to offset the cost of tariffs. In these cases, consumers might wind up “paying for” the tariffs, but they don’t literally pay the tariffs themselves.
U.S. tariffs on Canadian goods
Trump’s original tariff announcement included a 25% levy on goods exported from Canada to the U.S. A smaller 10% tariff was applied to Canadian oil.
It’s important to note that the White House characterized the move as implementing “additional” tariffs on Canada, so it’s not as if this is a brand-new phenomenon. U.S. tariffs on Canadian softwood lumber, for example, have been in effect for years.
Canada’s tariffs on U.S. goods
The government of Canada planned to impose its own 25% tariffs on February 4 and released a list of targeted American goods. It included:
- Poultry and eggs
- Dairy
- Sugars, chocolate and ice cream
- Sausages and other prepared meat
- Citrus, melons, apricots, cherries, peaches, tomatoes and several berries
- Nuts and preserved fruit
- Beer, wine and other fermented beverages
- Sauces and condiments
- Coffee and tea
- Seasonings: pepper, nutmeg, vanilla, ginger and several common herbs/seeds
- Wheat, rye, barley, oats and rice
- Pasta
And that’s just a fraction of the food and drink items included in the list of tariffs released by the Department of Finance. Clothes, tires, floor coverings, soap and shampoo — it’s a worryingly long list of items that could cost you more.
Why is the U.S. proposing tariffs on Canada?
A country may put tariffs into place for a variety of reasons, such as:
- Increasing national revenue through import taxes.
- Reducing a perceived reliance by limiting the consumption of goods produced outside the country.
- Protecting domestic companies and jobs by making foreign goods more expensive.
- Applying economic pressure on a trading partner.
- The revenues generated by taxing Canadian (as well as Mexican and Chinese) goods could be used to offset the cost of extending his 2017 tax cuts.
- Applying economic pressure on Canada could rebalance a trade relationship Trump has deemed “tough” and tilted in Canada’s favour.
- U.S. companies who can’t afford to pay the tariffs might be forced to choose U.S.-based suppliers instead.
Trump’s proposed tariffs actually tick all of those boxes.
Beyond these economic rationales, Trump has also cited the flow of fentanyl and undocumented immigrants into the U.S. from Canada as justifications for the tariffs. Despite conflating the security situation at the U.S.- Canada border with that of the U.S. -Mexico border, there is no statistical backing for Trump’s claims. We must hope that his side of the negotiations with our government have been in good faith, as Canada has been quick to act and quick to deploy further investment into the Canada - U.S. border - which is already the most secure border in the world. (canada.ca)
In its initial announcement of the proposed levies, the White House said tariffs will be implemented until “the crisis is alleviated.” However, with no clear criteria outlined, it remains uncertain what conditions would lead to tariffs being lifted.
How could these tariffs affect you?
Whatever the intention, tariffs often have negative consequences for consumers — in both countries involved.
If they are implemented, the potential effects of Trump’s tariffs on Canada include:
- Higher prices for consumers. In addition to suppliers having to raise their prices because of increased costs, there’s also the risk of higher demand for locally-produced items leading to shortages and price spikes of their own.
- Job losses in industries dependent on exports. Food, automobile, aerospace and petroleum producers could all take a major hit.
- Retaliation from trade partners, i.e. a “trade war.” Trump has reportedly threatened to impose higher tariffs if Canada retaliates with import taxes of its own.
- Global supply chain disruption. If U.S. importers turn to non-Canadian countries for their goods, that increased demand could hamper production capacity and put pressure on shipping routes.
Canada exports billions of dollars in goods and services to the United States each day. If demand for those goods were to suddenly dry up because American companies don’t want to pay tariffs, it could have dire consequences for the economy — including recession.
Canada's 13 premieres were in Washington this week connecting with business groups and Republican lawmakers. This diplomatic push represents the first time all 13 premieres have travelled to the American Capital together. Displaying a force of unity and diplomacy and to hopefully remind the White House why the Canadian-American friendship has been one of the most preeminent in the world for many decades.
We will continue to provide updates as the tariffs situation develops.