Deal or no deal, Trump's looming 35% tariff has business worried about current exemptions

Hamilton Spectator

2 days ago

With Prime Minister Mark Carney suggesting Canada might not ink a trade deal with the U.S. by Donald Trump's Aug. 1 deadline, Canadian business leaders say their biggest concern is keeping existing tariff exemptions in place.
The U.S. president has said that unless there's an agreement by Aug. 1, that Canadian exports to the U.S. will face an across the board tariff of 35 per cent.
Deal or not, the crucial thing for businesses and the Canadian economy is keeping an existing exemption from tariffs for goods which comply with the Canada-U.S.-Mexico agreement on trade, said Matthew Holmes, head of public policy for the Canadian Chamber of Commerce.
'I think that would be in place either way, you know, and that's my hope, because if we're no longer getting any kind of CUSMA exemption, then we're in a very different territory,' said Holmes. 'That is an absolute economic crisis.'
The White House has previously signalled that the CUSMA exemption would continue to apply if there's no deal.
The package includes caps on imported steel, a push to prioritize Canadian steel in government
But given Trump's unpredictability, that's not exactly a certainty, said Holmes. Nor, he added, is the possibility of more sector-specific tariffs the day after any deal is signed.
'I think even if we get a deal Aug. 1, we could see him announce more tariffs on Aug. 2, or Aug. 7,' said Holmes.
Dan Kelly, head of a small businesses advocacy group, thinks there's a fifty-fifty shot at some kind of deal by Trump's deadline.
Kelly also says that keeping the CUSMA exemption in place is vital — even more important, he argued, than trying to reduce the sector-specific tariffs on steel, aluminum, cars and copper.
'As harmful as the sectoral tariffs are, protecting the CUSMA exemption is, I would say, job one on the part of the federal government,' said Kelly, CEO of the Canadian Federation of Independent Business.
If a broad-based U.S. tariff does get implemented, Kelly worries that Canada could react with an across-the-board tariff on U.S. imports. That, said Kelly, would hurt Canadian consumers and small businesses alike.
'Are we going to be happy with a 10 or 25 per cent across-the-board tariff on all U.S. goods when each of us as consumers and almost half of businesses import products every day from the United States?,' Kelly asked.
Trump boasted about deals with Japan and the Philippines in posts on social media Wednesday morning, and claimed he will only consider lowering tariff rates if countries open their markets to the United States.
'I will always give up Tariff points if I can get major countries to OPEN THEIR MARKETS TO THE USA,' the president posted. 'Another great power of Tariffs. Without them, it would be impossible to get countries to OPEN UP!!! ALWAYS, ZERO TARIFFS TO AMERICA!!!'
Many details of the loose frameworks for the agreements with Japan and the Philippines remained unclear after the president's initial announcements Tuesday.
Japan will still be hit with 15 per cent tariffs — down from Trump's proposed 25 per cent duties — and the Philippines will be hit with 19 per cent levies — slightly lower than the threatened 20 per cent.
In return, the president said both countries would open their markets to American goods. The president also said Japan would invest $550 billion in the U.S. 'at my direction.'
The White House on Tuesday also provided more information on the framework of the deal with Indonesia that Trump announced earlier this month. That agreement will see Indonesia hit with a 19 per cent tariff, down from Trump's proposed 32 per cent levy.
Trump previously announced frameworks for deals with the United Kingdom and Vietnam.
On Tuesday, Carney confirmed Canada-U.S. Trade Minister Dominic LeBlanc is in Washington this week but downplayed expectations of a deal by Trump's deadline.
'They're complex negotiations and we'll use all the time that's necessary,' Carney told reporters after meeting with premiers at the Council of the Federation gathering in Huntsville, Ont.
Carney said the government will agree to a deal 'if there's one on the table that is in the best interests of Canadians.'
Countries around the world are watching for details of the deals.
It remains unclear whether striking an agreement with the U.S. now would mean a reprieve from Trump's separate import taxes on steel, aluminum and automobiles, which operate outside his global tariff regime.
Duties on copper are also set to be introduced on Aug. 1.
With files from The Canadian Press