Canada, Mexico Spared from Worst of Trump’s Latest Tariff Blitz

U.S. President Donald Trump has offered a reprieve to Canada and Mexico, potentially giving them a competitive advantage if they stay within the bounds of the continental trade agreement. 

In his most sweeping protectionist measures yet, Trump placed a 10-percent baseline tariff on imports into the U.S., with considerably higher tariffs on dozens of trading partners including the European Union, China, and Japan. However, Canada and Mexico will not face the baseline tariff or a higher country-specific duty. 

Both countries remain subject to the across-the-board tariffs imposed in early March, ostensibly to force Ottawa and Mexico City to address border security problems. However, goods that comply with the United States-Mexico-Canada Agreement (USMCA) will remain exempt.

This means a significant portion of Canadian and Mexican goods will continue to trade tariff-free, while other countries face a steep jump in duties. In effect, Mr. Trump is forcing more North American trade to happen under the auspices of the USMCA, while making it prohibitively expensive for companies to export non-compliant goods to the U.S.

CIBC chief economist Avery Shenfeld said that Canada appears to have gotten off lighter than expected, but that remaining tariffs on aluminum, steel, vehicles, and auto parts are still “very problematic.” According to economists at Toronto-Dominion Bank, the effective tariff rate Canada now faces from the U.S. is roughly 10%, up from less than 2% before Mr. Trump took office. CIBC economists estimate the average effective tariff rate could be 5 per cent if all goods become compliant with the USMCA.

Canadian business groups are tepidly optimistic that Mr. Trump’s decision to leave out Canada and Mexico from reciprocal tariffs means any trade-related disputes can be punted off to the renegotiation of the USMCA. The agreement is up for a review in July, 2026, though politicians may push for negotiations sooner. There is also some hope that border-related tariffs imposed on Canada and Mexico may be lifted.

Canada and Mexico will still get hit by sector-specific tariffs on steel and aluminum alongside automobiles, although cars that trade under the USMCA won’t pay levies on the value of the vehicle made up of U.S. auto parts. By giving Canada and Mexico a break, Mr. Trump has shown the value of the USMCA but also increased his leverage ahead of the negotiations of the free-trade pact.

Source: Globe and Mail
Source: Financial Post

Canada Vows to Fight Trump’s Trade War with Purpose and Force

Canada’s Prime Minister Mark Carney has warned that the trade war sparked by Donald Trump will harm the global economy and affect millions of Canadians and Americans. Despite the US President’s exclusion of Canada from new reciprocal tariffs, he still imposed steep import levies on Canadian steel, aluminum, vehicles, and auto parts. 

Carney, the Liberal Leader, paused his campaign in the federal election to hold meetings on tariffs and will discuss with provincial and territorial premiers on April 3rd. He promised retaliatory countermeasures but did not specify what they would entail.

Carney acknowledged that Canada avoided some of the new global tariffs, but he said U.S. tariffs on autos, steel, and aluminum will cause economic hardship and warned that the Trump administration is also expected to target Canadian lumber, pharmaceuticals, and semiconductors. He emphasized that the series of measures will directly affect millions of Canadians and that it is essential to act with purpose and force.

The U.S. action against its global trading partners will trigger economic havoc around the world and in North America. Trump’s executive order kept in place the 25% tariff on steel and aluminum, a 25%t levy on made-in-Canada automobiles, and the 25% tariff on most goods, which was applied after Trump alleged Canada is a significant source of illegal fentanyl smuggled into the United States. Since early March, these levies have been lifted for all goods that comply with the United States-Mexico-Canada Agreement (USMCA).

Conservative Leader Pierre Poilievre criticized the persistent U.S. tariffs on Canada as an “unfair attack on our economy” and singled out Trump’s levies on automobiles and light trucks. He urged Canada to end its era of over-dependence on the U.S. and become an economic fortress that can defend itself and put Canada first.

Jean Charest, a former Quebec premier and member of Carney’s Canada-U.S. advisory council, said Canada got “different treatment” from Europe and others, but not “special treatment” as tariffs remain on steel, aluminum and cars. He argued that Canadians are suffering from a Stockholm syndrome due to Trump’s chaos and uncertainty. However, Charest said Trump has re-anchored the relationship within the CUSMA deal and plans to use legislation to enact tariffs, giving Canada a better chance to engage with elected representatives in the U.S. on their concerns.

Canada’s representative in Washington, David Paterson, has expressed relief at the Trump administration’s announcement of zero tariffs on Canadian exporters who are compliant with the USMCA trade deal. Even the President’s 25-% tariff on all imported autos and auto parts is less of a hit than it is for other countries. Ontario Premier Doug Ford’s negotiations with U.S. Commerce Secretary Howard Lutnick contributed to the success of the 25% tariff reduction to 12.5% for vehicles containing 50 per cent U.S. parts. Alberta Premier Danielle Smith declared victory in the trade dispute, crediting her own style of diplomacy. She called for governments to support affected workers across Canada until the dispute is resolved.

Ravi Kahlon, a lead cabinet minister in the British Columbia government on the trade file, said his province will continue to work to reduce its trade reliance on the U.S. He expects the federal government to announce tariffs that will affect the U.S. and have minimal impact on Canadians. New Brunswick Premier Susan Holt said the economic uncertainty has not gone away, and Manitoba Premier Wab Kinew provided $10-million in additional funding for farmers and producers to counter the threat of future tariffs.

Canadian Chamber of Commerce president Candace Laing said global U.S. tariffs will undoubtedly boomerang on Canada’s economy, but expressed hope that Canada and the U.S. can sit down for negotiations on a new continental trade and security agreement.

Source: Globe and Mail
Source: The Star