Foreign Affairs Minister Mélanie Joly speaks during a meeting at the State Department in Washington, on Feb. 13, 2024.Mark Schiefelbein/The Associated Press
The Prime Minister and Canada’s premiers left a meeting Wednesday promising to come up with “retaliatory measures” to respond to U.S. president-elect Donald Trump’s threatened tariffs, but they have yet to say what exactly those actions would include.
Canada has a number of options, but almost all of them could do further damage to the country’s economy or national unity, legal and trade experts warn – and some would likely have little effect on the U.S.
And one premier, Alberta’s Danielle Smith, publicly broke from the federal government and her colleagues on Wednesday over concerns that Canada’s retaliation could target oil and gas exports to the U.S.
Here’s what Canada could do.
Targeted tariffs
The federal government has already drafted a list of limited potential retaliatory tariffs – not unlike the moves it made in Mr. Trump’s first term when he imposed levies on Canadian steel and aluminum. Provinces were expected to submit their own proposals at Wednesday’s meeting.
The Globe and Mail has reported that Ottawa’s selective targets include things such as orange juice from the Trump-friendly state of Florida. Hitting only certain sectors or products, in a way that is designed to send a message, could spare some of the broader added blowback effects on Canada’s economy, such as rising prices.
But some say a small targeted list may be too limited to get Canada’s message across in Washington.
“Unfortunately, the logic of mutual assured destruction depends on being willing to be hurt yourself as much as the other guy,” said Jim Stanford, director of the Vancouver-based Centre for Future Work and the former chief economist for the Unifor union. “So in that regard, Canada has to be ready with the big guns.”
‘Dollar-for-dollar’ tariffs
Canada could also choose to respond to tariffs in kind and immediately slap a 25-per-cent levy on all U.S. imports, matching them dollar-for-dollar. But critics of this approach warn it would multiply the Canadian pain caused by the initial U.S. tariffs.
Dennis Darby, president and chief executive officer of the industry group Canadian Manufacturers and Exporters, said Canada should follow the path it took in Mr. Trump’s first term when the country imposed targeted retaliatory tariffs to counter U.S. ones on steel and aluminum. He said Canada excluded inputs, such as parts destined for Canadian factories, in order to avoid doing even more harm to domestic industries.
An analysis released last year by Bank of Nova Scotia chief economist Jean-François Perrault estimated that 25-per-cent tariffs on Canada’s U.S. exports, combined with matching tariffs imposed by Ottawa on American products, could gouge a whopping 5.6 per cent off Canada’s gross domestic product.
Without matching those U.S. tariffs, Canada’s economic growth would be just 2.7 per cent lower, the study said. (The estimates show U.S. tariffs alone would feed inflation there and knock 0.9 per cent off American GDP.)
Energy
If oil is excluded from Mr. Trump’s tariffs, Canada could choose to try and hit Americans at the gas pumps by either completely blocking Canada’s oil exports to the U.S., or by imposing an export levy on any oil shipped south.
But leaving this as an option, even as a last resort, blew up at Wednesday’s premiers conference, prompting Ms. Smith to refuse to sign its final communique. The Premier of Alberta, where oil is central to the economy, previously warned that restrictions on the commodity would cause a “national unity crisis.”
Legal experts say there is no question the federal government has the constitutional authority to turn off oil taps to the U.S., where half of the country’s imports come from Canada – but the political consequences are another matter.
Veteran trade lawyer Lawrence Herman said it could be done by cabinet by an order-in-council, without any vote in the Commons, and that an oil export ban would be a more likely move as it is simpler to implement than some sort of surtax.
Carlo Dade, the director of trade and trade infrastructure for the Calgary-based Canada West Foundation think tank, says any such move on oil would not only alienate Western provinces, but could backfire, as the Americans could use their oil reserves to cushion the blow while they find other sources.
The same goes for Ontario Premier Doug Ford’s idea to cut off electricity exports, Mr. Dade said, as Canada often imports that, too.
Potash
One thing Canada has that the U.S. can get almost nowhere else – except Russia – is Saskatchewan’s potash, needed for growing corn and other crops, Mr. Dade said.
Saskatchewan provides about 87 per cent of U.S. potash imports, compared with 9.5 per cent for Russia, according to provincial figures.
But shutting down potash shipments to the U.S. would throttle that province’s economy.
He said the federal government should have been preparing a strategy months ago to support workers and industries across the country likely to be affected by an impending trade war.
Critical minerals
B.C. Premier David Eby has suggested Canada holds some trump cards in the form of what are known as critical minerals, needed for electronics and batteries, that could be subject to export bans.
He points to germanium, much of the U.S. supply of which comes from a facility in Trail, B.C. China no longer allows the substance, used for night vision goggles and electronics, to be shipped to the U.S.
Ontario’s Mr. Ford was pitching a vision this week of greater co-operation with the U.S. on critical minerals, also found in his province’s North, as the U.S. decouples from China.