An employee works on the production line at the Martinrea auto parts manufacturing plant, in Woodbridge, Ont., on Feb. 3.Chris Young/The Canadian Press
Even for a presidency that has waged pitched trade battles from its earliest hours, the next few days promise to be like no other.
It is tariff week in the United States, a pivotal moment in Donald Trump’s ambition to bend global trade to American advantage. On April 2, Mr. Trump’s vaunted “Liberation Day,” the White House plans to release a raft of what it terms reciprocal tariffs.
After months of trade tumult, much remains uncertain. Neither the size nor the extent of the coming tariffs is clear. Nor has the White House given any indication of what concessions, if any, it may be prepared once again to give.
But for Canada, the risk is clear. Any additional trade levies will arrive nearly simultaneously with a promised 25-per-cent tax on cars and auto parts not made in the U.S. and the expiry of a one-month reprieve on 25-per-cent tariffs for goods compliant with the U.S.-Mexico-Canada Agreement.
That’s in addition to tariffs on steel and aluminum that have already taken effect.
“We’re looking at four layers of tariffs being in place if all the threats come through by the end of this week,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association (APMA).
How do Trump’s tariffs affect Canadian business? We answer your questions
That would make this, he said, the latest in a series of moments since the re-election of Mr. Trump that could qualify as the most consequential in modern Canadian trade history – an end to continental free trade, imposed by a U.S. President who has acted with little regard for past agreements that he himself negotiated.
Prime Minister Mark Carney has promised retaliatory tariffs in response to any U.S. levies that target Canada on April 2, a message that he delivered after a phone call with Mr. Trump last week. Mr. Carney, running as Liberal Leader in the April 28 federal election, has previously noted that the federal government has developed another round of potential tariffs that could target as much as $125-billion worth of American goods.
The rest of the world is also bracing itself. Mr. Trump has expressed a determination to press back against a lengthy list of countries he has accused of taking advantage of the U.S., including India, Ireland, Britain and South Korea.
Diplomats and senior political leaders from many of those countries have made concerted efforts to seek exemptions. India is pursuing a bilateral trade agreement with the U.S. and has already slashed duties on imports of bourbon and large motorcycles such as those made by Harley-Davidson. British leaders have pursued an “economic prosperity deal.” Japan has argued that it should be granted preferential treatment based on the scale of its industrial investments in the U.S.
But while Mr. Trump has fashioned himself a negotiator always open to a deal, he has also built his presidency around an idea that wide-reaching tariffs hold the key to solving myriad U.S. economic problems, from the decline of manufacturing to personal income-tax burdens to the yawning deficits in federal funding.
The coming tariffs will be “permanent, sure,” Mr. Trump told NBC this weekend. “The world has been ripping off the United States for the last 40 years and more. And all we’re doing is being fair, and frankly, I’m being very generous,” he said.
Unlike some of the tariffs Mr. Trump has introduced in the past few months, those coming this week are expected to be based on formal trade investigations that Mr. Trump ordered on his first day in office. That means “some of the tariffs are more likely to stick because they will have some facts behind them,” said Gitane De Silva, the founder of advisory company GD Strategic. She was Alberta’s senior representative to the U.S. during the first Trump administration.
The justification used may open the U.S. to challenge – can Europe’s value-added tax, for example, reasonably be considered a trade measure? – but the notion of tit for tat makes for potent politics, Ms. De Silva said. “The challenge is, ‘reciprocal tariffs,’ I think, sound good. That’s easier for people to understand: I will treat you as you treat me.”
Economists and industry analysts have nonetheless warned that tariffs will bring considerable duress to the United States, accelerating inflation, unsettling supply chains and damaging investor confidence. Already, consumer sentiment in the U.S. has plunged to levels not seen since the pandemic. Investors have beaten down stock valuations, with the Nasdaq Composite Index down more than 10 per cent this year. Major U.S. banks have warned that the U.S. is at risk of falling into recession.
Mr. Trump has dismissed those concerns, saying he does not believe that his actions will produce inflation – even as he also told NBC this weekend that he “couldn’t care less” if levies on foreign-made cars raise the price of those vehicles.
Indeed, Mr. Trump “doesn’t care what other collateral economic damage he leaves in his wake for other countries,” Adam Legge, president of the Business Council of Alberta, said in an interview Sunday.
For Canadians whose business is deeply interwoven with that of the U.S., that prospect is prompting new considerations of whether it is in Canada’s best interests to continue vigorously matching U.S. measures in a deepening trade war.
U.S. tariffs are concerning enough for businesses across the West, Mr. Legge said, but his members are just as worried about Canada’s response, and whether it makes them more uncompetitive domestically.
In February, as the trade-war threat intensified, provincial business groups from Manitoba, Saskatchewan, Alberta and British Columbia banded together to create the Western Business Coalition.
It has repeatedly advised Ottawa against a dollar-for-dollar response, Mr. Legge said, because it will hurt Canadian businesses more than those south of the border.
“We don’t have the ability to inflict a sufficient knockout punch that will make the Americans flinch and reconsider,” he said.
For Canada, fossil fuels and automotive products are by far the two largest components of trade with the United States.
The U.S. assembled 10.75 million vehicles and bought 16.07 million over the past year, Douglas Porter, the chief economist at BMO Financial Group, wrote in a research note on Friday. It exported about 1.5 million vehicles, leaving a gap of more than five million cars and trucks that needs to be filled from somewhere.
The bank can’t precisely gauge the economic impact of the auto tariffs until the full details – and Ottawa’s response – are revealed.
“However, we do know that vehicle prices are going higher, especially in the U.S., and production is likely to be stunted, especially in Mexico and Canada,” Mr. Porter wrote. And, he added, “the conclusion has got to be that the marginal price for autos is about to rise, and rise markedly.”
However, significant uncertainty remains around the approach that Mr. Trump will take.
One lesson from the past couple of months is that the U.S. President will announce broad tariffs, then walk back elements of his policy that are especially damaging to Americans, said Canadian Chamber of Commerce president Candace Laing.
However, she warned against accepting “the lesser of two evils,” whereby securing a lower tariff rate is seen as a win.
For others, the months of on-again-off-again turmoil with the U.S. have given rise to a more fatalistic thought.
“There’s a growing sense amongst affected parties and countries that if we’re going to have this trade war, if we’re going to have this tariff war – then get to it,” said Mr. Volpe, APMA president.
“Because there’s nothing that we can do to counter it that will be more effective than the pain he puts on American industries, on American workers and on American prices.”
Point Roberts, Wash., is the rare U.S. exclave so dependent on Canada’s goodwill that the strain of Trump’s tariff war is inescapable – in the grocery store, at the pub and for the majority of residents who never voted for the President.
The Associated Press