President Donald Trump speaks in the James Brady Press Briefing Room at the White House on Jan. 30.Alex Brandon/The Associated Press
U.S. President Donald Trump said Thursday he will impose 25-per-cent tariffs on goods from Canada and Mexico on Saturday – levies that threaten to deliver massive economic shocks to two of the United States’ biggest trading partners.
Mr. Trump, however, said Canadian oil might be exempt from the tariffs, and he would make a decision by end of day Thursday. Canada is the top foreign supplier of oil to the United States, representing about 60 per cent of its imports, and hitting a record of 4.3 million barrels a day last year.
“We’ll be announcing the tariffs on Canada and Mexico for a number of reasons,” Mr. Trump told reporters in the Oval Office.
The U.S. President cited three: illegal migration and smuggling of fentanyl into the United States from Canada and Mexico, as well as imbalances in trade between the United States and these two countries.
These together represent the sum of complaints voiced repeatedly by Mr. Trump, particularly since winning the November presidential election. He is upset about the United States’ merchandise trade deficit with Canada, which has averaged a little over $100-billion annually for the past three years on around $1-trillion in annual two-way trade. The trade deficit is smaller when services are taken into account.
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Mr. Trump said the tariffs may rise over time.
“Mexico and Canada have never been good to us on trade. They’ve treated us very unfairly on trade and we will be able to make that up very quickly because we don’t need the products that they have. We have all the oil that you need, we have all the trees you need – meaning the lumber. We have more than almost anybody in those two categories,” the President said.
The Canadian government says the U.S. trade deficit with Canada – where Americans buy more from Canada than vice-versa – is the result of large petroleum exports to the United States.
If the United States hits all Canadian goods with a 25-per-cent tariff on Saturday, it could increase pressure from premiers and other quarters for the governing Liberals to recall Parliament to address the crisis that will result. The bulk of potential spending on new programs to help laid-off workers and businesses affected by tariffs would require parliamentary approval. Some measures, such as waiving the one-week waiting period for employment insurance benefits, would not.
Canada is heavily dependent on trade with the United States. In 2023, Canada exported $592.7-billion in goods to the United States – more than 77 per cent of this country’s total exports that year.
Were Mr. Trump to include Canadian oil in his tariff action, it would drive up gasoline prices in the United States despite his campaign pledge to lower them.
Canada's Minister of Energy and Natural Resources Jonathan Wilkinson speaks to media during a Liberal Cabinet Retreat in Montebello, Que., on Jan. 20.Blair Gable/Reuters
Natural Resources Minister Jonathan Wilkinson warned an American audience Wednesday that tariffs on Canadian oil would drive up gasoline prices in the U.S. Midwest by up to 75 cents a gallon – an example of how heavily the United States relies on its northern neighbour for energy and critical minerals.
Mr. Trump’s remarks made it clear he has not been convinced by Canada’s December announcement that it would spend $1.3-billion more on border security measures over six years, including Black Hawk helicopters, drones and chemical detection units.
Canadian officials have been sending the Trump administration video clips of the new investments as well as a multiday time lapse of the Canada-U.S. border to show there is no illegal southward migration. Canadian officials have repeatedly made the case that illegal migration and fentanyl smuggling from Canada into the United States represent a tiny fraction of the same illicit traffic from Mexico into American territory.
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While Mr. Trump spoke definitely of imposing tariffs, the Wall Street Journal reported that some of his aides are trying to avert them. The Journal said Thursday Mr. Trump’s advisers are considering several off-ramps to avoid enacting the tariffs on Mexico and Canada, citing unnamed people familiar with the matter.
The Canadian government, responding to Mr. Trump’s announcement, said a trade war would ultimately hurt Americans. It said the new border measures it has deployed are working to thwart the southward movement of illegal migrants and drugs.
It also warned of retaliation if the U.S. tariffs are imposed.
Finance Minister Dominic LeBlanc speak to reporters in Montebello, Que., on Jan. 20.Sean Kilpatrick/The Canadian Press
“Our government strongly believes that Canada’s decades-long partnership with the United States is mutually beneficial – and that tariffs on Canadian exports to the United States would be harmful first and foremost to American consumers,” Gabriel Brunet, press secretary to Finance Minister Dominic LeBlanc, said in a statement.
“Over the past few weeks, we have been implementing our border plan to further crack down on illegal activity at our border with the United States. We have deployed helicopters, drones and officers at strategic points along the border, and our measures are yielding results – southbound interceptions have markedly declined in the last number of months,” Mr. Brunet said.
“Should the United States impose tariffs on Canadian products, Canada will be ready to respond – firmly, and resolutely, to protect our national interests.”
As The Globe and Mail first reported, Canada’s first round of retaliatory tariffs would cover $37-billion of U.S. imports. These would be the least painful countertariffs because they would cause the least economic damage to Canadians, officials said. Depending on how hefty initial U.S. tariffs on Canada are, Ottawa would then move to tariffs covering another $110-billion or so of American goods.
Ottawa is readying a list of American goods it would target with retaliatory tariffs – including orange juice, ceramics such as toilets and sinks and some steel products – as part of a targeted response.
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The Canadian Chamber of Commerce’s Business Data Lab recently estimated that if Mr. Trump proceeds with his pledged tariffs and Canada counters with retaliatory tariffs, Canada’s annual economic output, or gross domestic product (GDP) would shrink by 2.6 per cent or $78-billion, costing Canadians approximately $1,900 per person annually.
It also estimated that the United States’ annual GDP would shrink by 1.6 per cent or US$467-billion, costing Americans approximately US$1,300 per person annually.
Donald Trump on the presidential campaign trail in Oaks, Pa., on Oct. 14, 2024, as moderator South Dakota Gov. Kristi Noem listens.Alex Brandon/The Associated Press
Mr. Trump said his decision on whether to include Canadian oil in tariffs will come down to whether “the oil is properly priced.”
It is unclear which yardstick Mr. Trump is using to determine whether Canadian oil is properly priced. The benchmark grade of crude, Western Canadian Select, a heavier blend, sells for a discount to West Texas Intermediate. The difference changes constantly, factoring in transportation and extra refining costs, as well as market and economic conditions.
That price spread has been unusually volatile over the past two weeks as buyers and sellers tried to wager whether the President would impose sanctions on oil, as he has threatened, and how high they would be. That discount on the Canadian oil was about US$15.40 a barrel on Thursday.
Analysts have warned that tariffs could prompt Canadian companies to cut back on shipments and could also mean a jump in pump prices for U.S. motorists.
Alberta Premier Danielle Smith’s office said it would comment once a decision is announced on whether Canadian oil is covered by the 25-per-cent tariff.
“In the meantime the Premier reiterates her call to the federal government to immediately appoint a qualified border czar to co-ordinate a joint U.S. Canada crack down on fentanyl and illegal migration at our shared border,” spokesman Sam Blackett said in a statement.
With reports from Jeff Jones and Emma Graney in Calgary