How can Canada fight Trump's tariffs? Take a page from his ‘One Big Beautiful Bill'

Toronto Star

7 days ago

Once he signed his aggressive tax and spending strategy aka the One Big Beautiful Bill Act into law, President Trump wasted no time ramping up his global tariff war.
For Canada, that means facing the potential threat of a 35 per cent levy on top of sectoral tariffs.
With Canada exporting more than 70 per cent of its goods to the U.S. and the U.S. exporting just over 17 per cent of its goods to Canada, President Trump knows the math is not in Canada's favour for an extended tariff war.
So how can Canada fight back — and win? By diversifying trade, streamlining regulations and cutting taxes. I believe tax cuts, in particular, are extremely important to attract investment, skilled talent and help businesses and the economy grow.
Prime Minister Carney is already taking steps to position Canada for a future where the U.S. plays a lesser role in our economy.
How Canada is adapting
If there is one silver lining in the chaos President Trump has created, it's that Canada and the rest of the world are forging new trade partnerships that do not include the U.S.
The result: Canadian exports to the U.S. have decreased from 75.9 per cent in 2024 to 68.3 per cent in May 2025 — their lowest since 1997, excluding COVID — while exports to countries other than the U.S. rose for a third consecutive monthly high in May.
This is likely not an outcome President Trump had anticipated and I expect this trend will continue.
It's a good development for Canada and the rest of the world. The federal and provincial governments are also working to remove all interprovincial trade barriers.
This could boost GDP by between three and eight per cent, lower prices by up to 15 per cent and add up to $200 billion to the national economy.
Canada is taking care of business and implemented Bill C-5 to accelerate major projects such as building pipelines and infrastructure for Ontario's Ring of Fire rare earth minerals project.
The case for tax reform
Focusing on trade and deregulation are important and a great start, but there is a third action Canada needs to take if it wants to succeed in this trade war. And that requires taking a page from the President's landmark budget.
U.S. Treasury Secretary Scott Bessent said the One Big Beautiful Bill is about stimulating growth and increasing GDP, in part by using tax cuts to incentivize investments in U.S. manufacturing. He argues that a growing economy will offset the growing national debt. I agree.
To that end, the new budget extends corporate tax breaks, provides specific tax benefits to spur the building of new manufacturing facilities, and allows 100 per cent tax writeoffs for equipment costs in the first year of purchase versus amortizing these costs over multiple years. All are good for business.
For individuals, the budget eliminates tax on overtime and tips — increasing take-home pay and wages.
Why would anyone in Canada want to work overtime when it could put you in an even higher tax bracket? It's not worth it. Not taxing overtime wages helps the bottom line of businesses, workers and the economy by improving productivity — a big issue for Canada.
If we are going to compete against our biggest trading partner, we need tax reform, and Canada's new one per cent cut for the middle class is not enough.
Carney has asked cabinet, the Bank of Canada and Crown corporations to cut spending by billions of dollars over the next three years. The focus of those cuts should be to drive growth as Canadian GDP has been flat for much of the year.
Now is the time to lay the foundation for future growth.
In a decade, we will look back on 2025 as the year Canada changed — hopefully for the better.
If we can negotiate good trade deals around the world, open up trade domestically and become less reliant on the U.S. then that would be a long-lasting benefit for our children and grandchildren.
We can't fight tariffs with tariffs, but if we can look at every policy through the lens of improving business and growth — this is how we win.