The Canadian government, alongside major business leaders, swiftly mounted a crisis response that drew striking comparisons to the emergency actions seen during the Covid-19 pandemic after US President Donald Trump announced his decision to implement 25 per cent tariffs on nearly all American imports from Canada.
In a coordinated effort, Canadian officials arranged an urgent meeting with the chief executives of the country’s top banks, along with the governor of the Bank of Canada. Finance Minister Dominic LeBlanc confirmed the gathering, which was also expected to include Canada’s banking regulator. The focus of the discussions was to explore potential governmental support and regulatory responses, including changes to bank capital rules, aimed at aiding Canadian businesses. This move, which echoes the discussions during the onset of the Covid crisis, reflects Canada’s efforts to avoid a sharp economic downturn amid rising trade tensions.
In parallel to these talks, Canadian provinces, including Ontario and Quebec, announced new retaliatory measures against the US, including the removal of US products from provincial liquor stores. In Ottawa, government staff confirmed that Canada would impose 25 per cent tariffs on over 1,200 categories of US goods, set to take effect in the coming days. An anonymous official within the Canadian government revealed that they were considering legal options in response to Trump’s decision, which they believe to be a clear violation of the US-Mexico-Canada trade agreement signed in 2020.
The new tariffs, which also include a 10 per cent levy on Canadian oil and gas, are expected to trigger job losses in Canada and potentially push the country into a recession, especially if the measures persist for several months. Economists pointed to Ontario and Quebec, two of the most populous provinces housing Canada’s automotive and aerospace industries, as particularly vulnerable. Bank of Nova Scotia economist Derek Holt expressed the nation’s sense of betrayal in his report titled “The Saturday Night Tariff Thrashing,” noting the unprecedented nature of the strained relations between Canada and its long-time ally. Holt described the situation as “breathtaking,” marking a sharp deterioration in relations between the neighbouring countries.
Trump’s tariffs, which he attributed to addressing the opioid crisis—specifically, the fentanyl trade—have sparked outrage in Canada. Canadian officials countered by citing US data, which indicates that Canada plays a minor role in the fentanyl trade, challenging Trump’s justification. They emphasized that Canada is taking extensive measures to combat the issue.
In response to the tariffs, Canada has implemented a two-phase retaliatory strategy. The first phase, set to begin this Tuesday, involves imposing 25 per cent levies on a broad range of US-made goods, totalling C$30 billion. Products including alcohol, cigarettes, coffee, motorcycles, and cosmetics are among the items targeted. This strategic move aims to create difficulties for US exporters, while minimising disruptions for Canadian consumers by sourcing alternatives for some of the products. A second phase, expected to follow in three weeks, would introduce tariffs on an additional C$125 billion worth of US products, including vehicles and trucks, unless a resolution is reached before then.
LeBlanc voiced pessimism over the possibility of a swift resolution, acknowledging that the trade war was unlikely to conclude within a matter of days. He suggested that talks may resume in March, but stressed the unpredictability of the situation. Canadians, particularly in Ottawa, have expressed their dismay through protests, including fans at hockey games booing the US national anthem, and circulating lists on social media on how to “Buy Canada” at grocery stores.
Former Canadian Finance Minister Chrystia Freeland, who is also running to succeed Justin Trudeau as the next Liberal Party leader, condemned Trump’s tariff actions, calling them “utter madness.” In a CNN interview, Freeland labelled the tariffs a betrayal, emphasising the depth of the US-Canada relationship and the strain caused by the move. Freeland’s remarks were echoed by other Liberal leadership candidates, including former Bank of Canada Governor Mark Carney, who jointly described the US tariffs as an attack on their countries’ longstanding economic partnership.
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Business organisations from across Canada, including lobby groups representing industries such as aluminium, beef, forest products, and canola, expressed their condemnation of Trump’s actions. The US aluminium industry also called for Canadian imports of raw metal to be exempted, in a bid to protect domestic jobs and manufacturers.
Economic experts have drawn parallels between Trump’s tariff decisions and the historic Smoot-Hawley Tariff Act of 1930, which aimed to protect the US economy during the early stages of the Great Depression. However, much like today, the move ignited an international trade war, resulting in a collapse of the global trading system. Senior research fellow Phillip Magness from the Independent Institute highlighted the potential for a similar outcome, warning that Trump’s tariffs could lead to a complete breakdown of the global trade system within a few years.
Canada’s response to the tariff imposition has been swift, strategic, and determined, with government leaders and businesses alike preparing for the worst while hoping for a resolution. As the trade war unfolds, Canada stands firm in its defence of its economic interests, facing an uncertain future with resilience.
