Prime Minister Justin Trudeau spoke with U.S. President Donald Trump today.MAURO PIMENTELJIM WATSON/AFP/Getty Images
Canada obtained a one-month reprieve from U.S. President Donald Trump’s threatened steep tariffs Monday after promising to invest $200-million more in fighting organized crime and drugs, with additional pledges to appoint a fentanyl czar and designate drug cartels as terrorists.
The agreement delays a costly and damaging trade war, at least for now, with Canada’s biggest trading partner – a row provoked by the White House that put Canadian jobs and business operations at risk, including auto assembly.
Under the terms of a deal struck by Prime Minister Justin Trudeau and Mr. Trump, Canada also agreed to launch a new joint strike force to combat organized crime, and illegal production and distribution of the deadly opioid fentanyl. Since November, Mr. Trump has promised to impose 25-per-cent tariffs on imports from Canada and Mexico as a means of forcing both countries to make a bigger effort to stop the smuggling of fentanyl into the United States. They had been set to take effect Tuesday.
According to U.S. government figures, border guards intercepted 19.5 kilograms of fentanyl along the Canadian border last year, which is 0.2 per cent of the nearly 11 tonnes intercepted in the U.S.
Uncertainty over the tariffs created a day of whipsaw trading on North American markets, while companies across the continent assessed the extent of economic damage they could expect. The Canadian dollar rose to US$0.69 after news of the reprieve.
For Canadian businesses, the pause amounts to “a bit more breathing room. But definitely not breathing easy,” said Candace Laing, president and chief executive of the Canadian Chamber of Commerce.
Mr. Trump re-entered the White House determined to alter the balance of U.S. trade. He and key members of his administration have described plans to use new tariffs as a tool to drive manufacturing on to U.S. soil. They also see taxes on foreign goods as a way to bolster American public finances. Among their plans is to use a new External Revenue Service to complement and, where possible, supplant the country’s Internal Revenue Service.
The U.S. President has also talked of imposing tariffs on foreign steel, aluminum and copper and by April 1, U.S. government departments and agencies are supposed to report to the White House on the United States’ trade deficits with major trading partners and recommend measures to rebalance.
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Mr. Trump talked about striking a fair “economic deal” with Canada by early March. “Tariffs announced on Saturday will be paused for a 30-day period to see whether or not a final Economic deal with Canada can be structured. FAIRNESS FOR ALL!” he wrote on Truth Social.
In a separate tariff-delay deal with Mexico, President Claudia Sheinbaum agreed on Monday to deploy 10,000 troops to help secure the Mexico-U.S. border. Like Canada, Mexico’s reprieve is for 30 days while the U.S. evaluates the progress its neighbours are making in fighting fentanyl. 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.
Mr. Trudeau announced the delayed tariffs Monday after two phone calls that day with Mr. Trump, the second less than eight hours before U.S. tariffs of 25 per cent on Canadian imports – and 10 per cent on Canadian oil – were due to take effect. Canada also paused its planned first round of retaliatory tariffs that would have covered $30-billion of American imports.
In their conversations, the two leaders talked about Canada implementing its December, 2024, commitment of $1.3-billion over six years in new border security investments, reinforcing surveillance with new helicopters, technology and staff. “Nearly 10,000 frontline personnel are and will be working on protecting the border,” Mr. Trudeau said in a post on X.
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Ontario Premier Doug Ford, who is fighting an election campaign, applauded the tariff pause. He said he would stop removing American products from provincial liquor stores. Plans to cancel the province’s $100-million contract with Elon Musk’s Starlink were also halted. “If President Trump proceeds with tariffs, we won’t hesitate to remove American products off LCBO shelves or ban American companies from provincial procurement.”
He said Canada is still feeling the impact of Mr. Trump’s effort to shift jobs and manufacturing to the United States.
“Make no mistake, Canada and Ontario continue to stare down the threat of tariffs. Whether it’s tomorrow, in a month or a year from now when we’re renegotiating the United States-Mexico-Canada Agreement, President Trump will continue to use the threat of tariffs to get what he wants,” Mr. Ford said.
“So long as our trading relationship with our largest trading partner is up in the air, we will continue to see many potential projects frozen and projects that were already under way put at risk.”
Mr. Trump, meanwhile, made fresh demands Monday for Ottawa to allow American banks greater latitude to operate in Canada.
One of Mr. Trump’s first acts in office was to sign an “America-first trade policy” that involves intensive new scrutiny of existing agreements, including the USMCA. Reports on those investigations are due April 1.
That suggests more tariffs are coming, said Gitane De Silva, the founder of GD Strategic, an advisory company, who was Alberta’s senior representative to the U.S. during the first Trump administration.
“Whether it is actually more targeted, whether it is more grounded in facts – that remains to be seen,” she said. “But I would be surprised if there wasn’t a new wave or another threat.”
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Mr. Trump has no choice but to bring new taxes on foreign goods to fulfill other promises, such as removing taxes on tips, said Zach Mottl, the president of Illinois-based Atlas Tool & Die Works. He chairs the Coalition for a Prosperous America, which has advocated for universal U.S. tariffs.
He hopes the approach in future will be more nuanced than the blanket 25-per-cent levy Mr. Trump sought to impose on Canada and Mexico. The renegotiation of USMCA, meanwhile, may present an opportunity to maintain North America as a lower-tariff region, even as Mr. Trump seeks new levies on other countries.
But, he said, Mr. Trump has demonstrated the power of tariffs to prod other countries into action.
“I take this as a win,” he said.
On border issues, meanwhile, the 30-day tariff pause amounts to a test, said David Asher, a senior fellow at the Hudson Institute who has advised the U.S. Drug Enforcement Administration for more than two decades.
The American security establishment has long chafed at Canadian disclosure laws that make it difficult to keep sources confidential in court, frustrating proceedings against organized crime. Canada, too, has become a haven for senior figures in global money laundering, Mr. Asher said.
“The networks that reside in Canada are dominant,” he said. “They’re huge.”
For Canada, “it’s time to get past the lip service,” he said. “This is a time for action, not talk. And we’ll have 30 days to figure that out.”
The imposition of 25-per-cent tariffs by the U.S. would have disrupted free trade in North America, a threat that prompted an outpouring of anxiety and anger in Canada. Hockey fans booed the singing of the U.S. national anthem, while liquor stores across the country emptied their shelves of U.S. bourbons and wines.
On Monday, members of the Trump administration argued that the sole intent of the tariffs was to prompt action on illegal narcotics.
Kevin Hassett, the director of the National Economic Council, said personal experience had convinced him that Canada is a bad actor in drugs.
He described travelling to Alberta last summer for a fishing trip, with a stop in Edmonton. He walked out of his hotel and saw “an ambulance there helping somebody who had OD’d, sadly, on fentanyl,” he told CNBC Monday. “And then as I’m walking to my restaurant two people get in a fight with the cops over drugs.”
But Mr. Hassett said his own experience had shown him the seriousness of the problem north of the border.
His conclusion: “Canada is like San Francisco, and it’s spreading to the U.S. And it needs to stop.”
With reports from James Bradshaw and Laura Stone.
U.S. President Donald Trump has paused new tariffs on Mexico for one month after Mexico agreed to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal drugs, particularly fentanyl. This report produced by Jillian Kitchener.
Reuters