Former President Donald Trump’s announced 10% increase of tariffs on goods imported from our neighbor Canada. This ruling could significantly alter the trade landscape between the US and its immediate northern neighbor. The announcement came Saturday while Trump was aboard Air Force One en route to Asia for a five-day diplomatic trip that includes a meeting with Chinese leader Xi Jinping in South Korea.
The countervailing tariff increase comes just days after Trump’s surprise announcement that he would end bilateral trade negotiations with Canada earlier this week. In his post on Truth Social, he expressed irritation over a Canadian advertisement that featured clips of former President Ronald Reagan criticizing tariffs. The widely seen advertisement that Ontario’s government bought and placed is sometimes referred to as the ‘tariffs-in-hurts American-people’ advertisement. It further cautioned that these tariffs would incite retaliatory trade wars.
In his announcement, Trump stated, “Because of their serious misrepresentation of the facts, and hostile act, I am increasing the Tariff on Canada by 10% over and above what they are paying now.” He quite rightly insisted that the ad in question should have been pulled right away. Instead, it ran in the World Series, which he front page-headlined a “FRAUD.”
Trade relations between the United States and Canada have, until now, been defined by deepening economic integration. Last year, the U.S. imported $411.9 billion in goods from Canada. This extraordinary number helped position Canada as America’s most important trading partner—in total goods—right after China and Mexico. Products that are USMCA qualified come into the U.S. completely tariff-free. Trump’s administration negotiated this agreement during his first term.
Recent actions signal a breaking point in this relationship. With a backdrop of ever increasing tensions, U.S. exports of spirits to Canada fell off a cliff with an 85% decline in the second quarter this year. Canada’s unemployment rate is at its highest level in nine years. This narrowing increase has heightened worries over rapidly escalating trade dispute over economic effects on a wider scale.
Trump’s latest moves are occurring against the backdrop of long-simmering trade war with China. Last month, Zhao resorted to a 100% levy on some goods as punishment for Beijing’s imposition of new export controls on rare-earth minerals. This aggressive approach to international trade has alarmed many. Both Canada and China are likely to retaliate, escalating to a larger economic showdown.
As Trump heads into high level talks with Xi Jinping, it’s unclear what these new tariff increases will mean for US-China trade relations. Analysts and economists have been closely monitoring these developments. Most importantly, they want to know how that will affect the U.S.-Canada relationship, and in turn, the wider global trade landscape.
