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Hamilton Spectator
6 days ago
- Business
- Hamilton Spectator
Deal or no deal, Trump's looming 35% tariff has business worried about current exemptions
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
Yahoo
21-07-2025
- Business
- Yahoo
America's terrible tariffs could actually be a huge win for Canada's economy
The whole thing about Canadians is that they're remarkably nice. Except lately, they haven't been feeling so warm and fuzzy, namely toward their neighbors to the south. Given everything that's going on — President Donald Trump's on-and-off trade war, his remarks about making the country the 51st state — Canada has a right to be annoyed with the United States. If your longtime bestie suddenly turned on you for no apparent reason, you'd be miffed, too. The US's sudden shift to frenemy status is going to cause some pain for Canada in the near term, especially as it stands to be a big economic loser from Trump's tariff tantrum. But ultimately, the turmoil may be a blessing in disguise for the Canucks. It's an opportunity for the country to step out of the star-spangled shadow and do its own thing. "It's really kind of a decoupling moment that is scary to watch in the short term. In the medium to long term, I have to say, it's an important wake-up call for Canada," says Matthew Holmes, the chief of public policy at the Canadian Chamber of Commerce. "If I look back on this in 20 years, I hope to be able to say that this woke Canada up to the need to be a little more strategic and have a little bit more of its own agency in the economy and in the kind of economy we want." If the US doesn't want to be as good of friends anymore, fine, Canada can make new, better friends, anyway. The US and Canadian economies are deeply intertwined. A shared language, geographic proximity, and interconnected supply chains have made the countries convenient strategic partners for decades. Three-quarters of Canada's exports go to the United States, and nearly half of its imported goods come from the US. In 2024, Canada was the third-largest source of imports to the US, behind China and Mexico. Canada was also the top destination for exports from the US. Several of the two countries' biggest industries, including automotives and energy, are highly interwoven with one another. Trump's belligerent stance toward Canada has thrown the country for a loop. While Canada isn't subject to the 10% blanket tariffs he's placed on imports from other countries, he's targeted specific areas with import taxes, including 50% tariffs on steel and aluminum, 25% tariffs on cars, 10% tariffs on potash and energy, and 25% tariffs on imports not compliant with the US-Mexico-Canada trade deal (formerly known as NAFTA). He's also planning to place a 50% tariff on copper come August. Most recently, the president threatened to put a 35% tariff on imports from Canada, blaming its retaliatory tariffs for the move, though it wasn't immediately clear what goods this would apply to. (The president says this is about fentanyl, though very little fentanyl comes to the US over the Canadian border.) A Trump administration official said in an email that they expected goods currently tariffed at 25% to go up to 35%, though no final decisions have been made by the president. Given Trump's persistent flip-flopping on tariffs, it's not clear whether they will actually take hold. This constant state of flux is making investors, at the very least, a bit more casual about the whole thing. The foreign exchange market, which tracks currency fluctuations, would indicate investors aren't too worried about it — the Canadian dollar isn't swinging based on Trump's pronouncements and has strengthened in recent months. "The market, so to speak, is seeing through a lot of this rabble-rousing," says Peter Morrow, an economist at the University of Toronto. The TACO trade — which is short for Trump Always Chickens Out and proxy for the idea that the president backs down from his most aggressive threats — is alive in the Great White North, too. Regardless, the American president's trade antics are taking a toll on Canada. It's the country most hurt by the US trade war so far — the US is second. An analysis from the Yale Budget Lab found Trump's tariffs and Canadian countermeasures could cause Canada's economy to shrink by 2.1% in the long term. The trade dispute increases the chances of a recession in Canada, and it threatens to increase inflation. It also injects an incredible amount of uncertainty into the economy. It's next to impossible for Canadian businesses to plan for the future when they have no idea what the guy in the White House is going to do, day-to-day. "It's not only the tariff wall; it's kind of a wall of uncertainty that's going up between the two countries," says Julian Karaguesian, a course lecturer in McGill University's economics department. "The immediate effect it's having in the short term is a cooling effect on business investment, which is the dynamic part of the economy." Canada isn't taking the economic punch in the face lying down. Canada's new prime minister, Mark Carney, and the Canadian public have taken a hockey-esque "elbows up" approach to the US. A "Buy Canadian" movement has swept the nation. Canadians are swapping out American-made products and groceries for national ones, guided by forums and apps that help distinguish locally made goods from their Yankee counterparts. Liquor stores have pulled American whiskeys off the shelves. Instead of going to McDonald's, Canadians are hitting up A&W. They're opening up the CBC Gem streaming app to see what's on there instead of Netflix. "Brand damage can last a long time. People won't remember in 10 years why they don't like Nike anymore, but they will still think slightly ill of it," a guy who runs a website called Shop Canadian Stuff tells me. He spoke with me on the condition of anonymity, because his job doesn't know about his nationalist side hustle. Evan Worman, one of the moderators of a Buy Canadian subreddit, tells me that Canadians redirecting their purchasing power is a loss for the US because it's opening people's eyes to the quality of non-American stuff. "People are going to find a lot of the products that are getting imported from Europe have better safety standards, have higher quality control than the US, and it doesn't come with all the hang-ups and baggage of buying from somebody who wants to invade you," he says. Worman is originally from Alaska and has lived in Canada for a decade. When people don't realize he's not Canadian, he doesn't correct them. "People are genuinely very angry at us right now," he says. The attacks are also fostering a willingness to reshape the domestic Canadian economy: Local governments are getting rid of internal trade barriers that have prevented goods from flowing between provinces. "We've had, for decades, stupid, unnecessary rules between Canadian provinces," says Dan Kelly, the president of the Canadian Federation of Independent Business. "There has been a resurgence of that among our members that are now saying, 'Well, wait a minute, if the US market is uncertain, then I'll send my goods to Ontario rather than to New York.'" The federal government says knocking down interprovincial trade restrictions could boost Canada's economy by $200 billion annually. Karaguesian believes that may be an overstatement, but that and the domestic focus are emblematic of a bigger shift. "The people that are running the United States are saying we don't really have any allies right now — we have adversaries, and we have countries we can tell what to do," making the emphasis on a more unified Canadian economy all the more important, he says. Also on the shorter-term front, many Canadian businesses that hadn't yet bothered to get compliant with the US-Mexico-Canada Agreement because previous tariff levels were so negligible are getting their ducks in a row. Holmes, from the Chamber of Commerce, says that pre-Trump, only about half of the products crossing the border were USMCA compliant, because companies hadn't bothered to do the paperwork, but over the past four months, that's gotten to about two-thirds. He estimates that 90% of Canadian products should be compliant overall but notes that "it's just the work of getting it done." Canadian companies aren't rushing to move their operations to the US — which seems to be, in large part, Trump's goal in all of this — but they are adapting. "They're diversifying their sales, and they're diversifying their suppliers," says Patrick Gill, the vice president of the Business Data Lab at the Canadian Chamber of Commerce. "And so they're looking to other international markets where Canada has established free trade agreements." The United States' attitudes have sent Canada seeking improved trade agreements and relations elsewhere, including Europe, Asia, and the Global South. In an attempt to wean itself off the US, Canada is looking to expand where it sources from and where it sells. But just how far to go is a difficult calculation. "Some people say that Canada should take the easy win, stay linked to the US, and just ride it out. And there's other people who say that the United States is not a reliable trading partner anymore, and that Canada should strengthen its relationships with other countries. But developing those other relationships is not easy," says Morrow, from the University of Toronto. Canada may be at its breaking point. Canadian political leaders and nationals feel like the US will never be satisfied, no matter how much ground they give. They find the 51st state jokes really offensive. And as much as the US-Canada relationship is extra strained right now, Canadians have long been skeptical of their larger neighbors. The US-Canada free trade agreement that predated NAFTA in the late 1980s was unpopular in Canada. Post-9/11, Canada resisted pressure from the US to join the Iraq invasion and chafed at President George W. Bush's "you're with us or against us" mentality. Some Canadian policymakers felt slighted by the Obama administration's attempts at pushing "Buy American" provisions and by the US-focused investments in the Biden administration's Inflation Reduction Act. The US and Canada have long grumbled over dairy and lumber. "Canada has a strong skepticism of the US even during the best of times," Morrow says, citing a quote from former Canadian Prime Minister Pierre Trudeau (Justin's father), who said living next to the US was like "sleeping with an elephant — no matter how friendly or even-tempered is the beast, if one can call it that, one is affected by every twitch and grunt." "The United States, for its entire history, has been a protectionist country except the time from the attack on Pearl Harbor in 1941 to the 9/11 attacks," Karaguesian says. "The United States was the biggest defender of free trade at the turn of the century because they were winning at that game." Trump says the US has "all the cards" in trade relations with Canada. The US certainly has more cards, but Canada isn't playing with an empty hand. The country has felt emboldened to strengthen trade relations with other partners, to revive its own manufacturing base, and to separate itself economically, culturally, and otherwise from the US. Kelly, from CFIB, compares Canada's retaliatory tariffs to economic chemotherapy — "you take the poison in order to try to fight the larger battle" — and adds that it says something that the country is so willing to dig in. "There is fairly significant resolve among Canadian businesses to press back," he says. To be sure, Trump's trade war is doing real damage to Canada — and, it should be said, to the US. Continuing the tit-for-tat won't mean mutually assured destruction for the neighboring countries, but it is one that will harm both, even if to different degrees. Canada's 40 million population can't replace the US's 340 million in terms of a consumer market. It will continue to depend on the US and, increasingly, others for commerce and trade. And the idea of a complete decoupling is quite unfathomable, unless Americans want to spend a ton more on energy and the entire North American auto sector is overhauled. At the moment, Canadians are fired up and holding their own. They don't appear to be poised to back down anytime soon — or to forget what's happening now. "Our elites need to wake up to the full nightmare of what Donald Trump's administration means in terms of trade," Karaguesian says. Much of the Canadian population already has — and years down the line, it could very well be to their country's benefit. Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy. Read the original article on Business Insider
National Observer
21-07-2025
- Business
- National Observer
Expert group says the next six months are 'crucial' for major projects bill success
Prime Minister Mark Carney 's government should prioritize Indigenous engagement and declare "low-risk, high-impact" projects as being in the national interest within the next six months to validate the major projects bill, an Ottawa-based group of experts says in a new paper. The Expert Group on Canada-US Relations at Carleton University released a white paper on the future of Canada's energy sector Monday morning, before Carney was set to meet with Canada's premiers in Huntsville, Ont. Carney asked to join the premiers during their annual summer premiers gathering after President Donald Trump threatened Canada with 35 per cent tariffs starting Aug. 1. The Building Canada Act, also known as Bill C-5, is a central piece of the Carney government's response to Trump's tariffs. The legislation gives the government the power to fast track projects like mines and pipelines deemed to be in the national interest, as the Liberal government seeks to shore up Canada's economy and rely less on trade with the United States. The expert group, co-chaired by former Canadian Chamber of Commerce president Perrin Beatty and Carleton University international affairs professor Fen Hampson, wrote that the next six months are critical for the signature piece of legislation to be seen as a success. Beatty said Trump's tariffs have created a "remarkable consensus" to change the way Canada conducts business. "For too long, we've been a nation of builders that can't get anything built, to the point where you get decision by delay, where projects get abandoned or not even proposed because of regulatory paralysis," Beatty said in an emailed response. "The prime minister has promised major improvements to the system, but to sustain and build the momentum, we have to show Canadians that the reforms are working." The white paper says the Carney government should designate national interest projects "immediately." That list should include liquefied natural gas, oil, nuclear, hydrogen and renewable energy infrastructure. The authors suggest deeming two LNG projects in northwestern BC, LNG Canada 2 and Ksi Lisims LNG, as being in the national interest because both have already cleared several regulatory hurdles. The Ksi Lisims LNG project is also a marine project, which puts it into federal jurisdiction. "These projects are more manageable through federal action, and the potential rewards for Canada — 50,000 jobs and $11 billion per year added to the GDP — are major," Beatty said. In order to deepen Indigenous engagement, the expert group says the government should formalize a co-developed benefit-sharing and equity process for land rights holders. Carney held his first of three meetings with Indigenous leaders on Thursday in Gatineau, QC, meeting with hundreds of chiefs. Some of the chiefs said they left the meeting feeling "cautiously optimistic," but others left early feeling that concerns they'd raised for weeks weren't being listened to. Still, Beatty called the meeting an "important first step." "The onus is on governments and business alike to demonstrate their good-faith commitment to the process and to communicate the tremendous opportunities these projects present for Indigenous communities," Beatty said. Winning the trust and confidence of Indigenous communities won't happen overnight, but the prime minister has demonstrated a commitment to making it happen, he said. Carney will co-host the Inuit-Crown Partnership Committee with Natan Obed, Inuit Tapiriit Kanatami president, in Inuvik, N. W. T., on Thursday to continue discussions about the legislation.
Yahoo
21-07-2025
- Business
- Yahoo
America's terrible tariffs could actually be a huge win for Canada's economy
The whole thing about Canadians is that they're remarkably nice. Except lately, they haven't been feeling so warm and fuzzy, namely toward their neighbors to the south. Given everything that's going on — President Donald Trump's on-and-off trade war, his remarks about making the country the 51st state — Canada has a right to be annoyed with the United States. If your longtime bestie suddenly turned on you for no apparent reason, you'd be miffed, too. The US's sudden shift to frenemy status is going to cause some pain for Canada in the near term, especially as it stands to be a big economic loser from Trump's tariff tantrum. But ultimately, the turmoil may be a blessing in disguise for the Canucks. It's an opportunity for the country to step out of the star-spangled shadow and do its own thing. "It's really kind of a decoupling moment that is scary to watch in the short term. In the medium to long term, I have to say, it's an important wake-up call for Canada," says Matthew Holmes, the chief of public policy at the Canadian Chamber of Commerce. "If I look back on this in 20 years, I hope to be able to say that this woke Canada up to the need to be a little more strategic and have a little bit more of its own agency in the economy and in the kind of economy we want." If the US doesn't want to be as good of friends anymore, fine, Canada can make new, better friends, anyway. The US and Canadian economies are deeply intertwined. A shared language, geographic proximity, and interconnected supply chains have made the countries convenient strategic partners for decades. Three-quarters of Canada's exports go to the United States, and nearly half of its imported goods come from the US. In 2024, Canada was the third-largest source of imports to the US, behind China and Mexico. Canada was also the top destination for exports from the US. Several of the two countries' biggest industries, including automotives and energy, are highly interwoven with one another. Trump's belligerent stance toward Canada has thrown the country for a loop. While Canada isn't subject to the 10% blanket tariffs he's placed on imports from other countries, he's targeted specific areas with import taxes, including 50% tariffs on steel and aluminum, 25% tariffs on cars, 10% tariffs on potash and energy, and 25% tariffs on imports not compliant with the US-Mexico-Canada trade deal (formerly known as NAFTA). He's also planning to place a 50% tariff on copper come August. Most recently, the president threatened to put a 35% tariff on imports from Canada, blaming its retaliatory tariffs for the move, though it wasn't immediately clear what goods this would apply to. (The president says this is about fentanyl, though very little fentanyl comes to the US over the Canadian border.) A Trump administration official said in an email that they expected goods currently tariffed at 25% to go up to 35%, though no final decisions have been made by the president. Given Trump's persistent flip-flopping on tariffs, it's not clear whether they will actually take hold. This constant state of flux is making investors, at the very least, a bit more casual about the whole thing. The foreign exchange market, which tracks currency fluctuations, would indicate investors aren't too worried about it — the Canadian dollar isn't swinging based on Trump's pronouncements and has strengthened in recent months. "The market, so to speak, is seeing through a lot of this rabble-rousing," says Peter Morrow, an economist at the University of Toronto. The TACO trade — which is short for Trump Always Chickens Out and proxy for the idea that the president backs down from his most aggressive threats — is alive in the Great White North, too. Regardless, the American president's trade antics are taking a toll on Canada. It's the country most hurt by the US trade war so far — the US is second. An analysis from the Yale Budget Lab found Trump's tariffs and Canadian countermeasures could cause Canada's economy to shrink by 2.1% in the long term. The trade dispute increases the chances of a recession in Canada, and it threatens to increase inflation. It also injects an incredible amount of uncertainty into the economy. It's next to impossible for Canadian businesses to plan for the future when they have no idea what the guy in the White House is going to do, day-to-day. "It's not only the tariff wall; it's kind of a wall of uncertainty that's going up between the two countries," says Julian Karaguesian, a course lecturer in McGill University's economics department. "The immediate effect it's having in the short term is a cooling effect on business investment, which is the dynamic part of the economy." Canada isn't taking the economic punch in the face lying down. Canada's new prime minister, Mark Carney, and the Canadian public have taken a hockey-esque "elbows up" approach to the US. A "Buy Canadian" movement has swept the nation. Canadians are swapping out American-made products and groceries for national ones, guided by forums and apps that help distinguish locally made goods from their Yankee counterparts. Liquor stores have pulled American whiskeys off the shelves. Instead of going to McDonald's, Canadians are hitting up A&W. They're opening up the CBC Gem streaming app to see what's on there instead of Netflix. "Brand damage can last a long time. People won't remember in 10 years why they don't like Nike anymore, but they will still think slightly ill of it," a guy who runs a website called Shop Canadian Stuff tells me. He spoke with me on the condition of anonymity, because his job doesn't know about his nationalist side hustle. Evan Worman, one of the moderators of a Buy Canadian subreddit, tells me that Canadians redirecting their purchasing power is a loss for the US because it's opening people's eyes to the quality of non-American stuff. "People are going to find a lot of the products that are getting imported from Europe have better safety standards, have higher quality control than the US, and it doesn't come with all the hang-ups and baggage of buying from somebody who wants to invade you," he says. Worman is originally from Alaska and has lived in Canada for a decade. When people don't realize he's not Canadian, he doesn't correct them. "People are genuinely very angry at us right now," he says. The attacks are also fostering a willingness to reshape the domestic Canadian economy: Local governments are getting rid of internal trade barriers that have prevented goods from flowing between provinces. "We've had, for decades, stupid, unnecessary rules between Canadian provinces," says Dan Kelly, the president of the Canadian Federation of Independent Business. "There has been a resurgence of that among our members that are now saying, 'Well, wait a minute, if the US market is uncertain, then I'll send my goods to Ontario rather than to New York.'" The federal government says knocking down interprovincial trade restrictions could boost Canada's economy by $200 billion annually. Karaguesian believes that may be an overstatement, but that and the domestic focus are emblematic of a bigger shift. "The people that are running the United States are saying we don't really have any allies right now — we have adversaries, and we have countries we can tell what to do," making the emphasis on a more unified Canadian economy all the more important, he says. Also on the shorter-term front, many Canadian businesses that hadn't yet bothered to get compliant with the US-Mexico-Canada Agreement because previous tariff levels were so negligible are getting their ducks in a row. Holmes, from the Chamber of Commerce, says that pre-Trump, only about half of the products crossing the border were USMCA compliant, because companies hadn't bothered to do the paperwork, but over the past four months, that's gotten to about two-thirds. He estimates that 90% of Canadian products should be compliant overall but notes that "it's just the work of getting it done." Canadian companies aren't rushing to move their operations to the US — which seems to be, in large part, Trump's goal in all of this — but they are adapting. "They're diversifying their sales, and they're diversifying their suppliers," says Patrick Gill, the vice president of the Business Data Lab at the Canadian Chamber of Commerce. "And so they're looking to other international markets where Canada has established free trade agreements." The United States' attitudes have sent Canada seeking improved trade agreements and relations elsewhere, including Europe, Asia, and the Global South. In an attempt to wean itself off the US, Canada is looking to expand where it sources from and where it sells. But just how far to go is a difficult calculation. "Some people say that Canada should take the easy win, stay linked to the US, and just ride it out. And there's other people who say that the United States is not a reliable trading partner anymore, and that Canada should strengthen its relationships with other countries. But developing those other relationships is not easy," says Morrow, from the University of Toronto. Canada may be at its breaking point. Canadian political leaders and nationals feel like the US will never be satisfied, no matter how much ground they give. They find the 51st state jokes really offensive. And as much as the US-Canada relationship is extra strained right now, Canadians have long been skeptical of their larger neighbors. The US-Canada free trade agreement that predated NAFTA in the late 1980s was unpopular in Canada. Post-9/11, Canada resisted pressure from the US to join the Iraq invasion and chafed at President George W. Bush's "you're with us or against us" mentality. Some Canadian policymakers felt slighted by the Obama administration's attempts at pushing "Buy American" provisions and by the US-focused investments in the Biden administration's Inflation Reduction Act. The US and Canada have long grumbled over dairy and lumber. "Canada has a strong skepticism of the US even during the best of times," Morrow says, citing a quote from former Canadian Prime Minister Pierre Trudeau (Justin's father), who said living next to the US was like "sleeping with an elephant — no matter how friendly or even-tempered is the beast, if one can call it that, one is affected by every twitch and grunt." "The United States, for its entire history, has been a protectionist country except the time from the attack on Pearl Harbor in 1941 to the 9/11 attacks," Karaguesian says. "The United States was the biggest defender of free trade at the turn of the century because they were winning at that game." Trump says the US has "all the cards" in trade relations with Canada. The US certainly has more cards, but Canada isn't playing with an empty hand. The country has felt emboldened to strengthen trade relations with other partners, to revive its own manufacturing base, and to separate itself economically, culturally, and otherwise from the US. Kelly, from CFIB, compares Canada's retaliatory tariffs to economic chemotherapy — "you take the poison in order to try to fight the larger battle" — and adds that it says something that the country is so willing to dig in. "There is fairly significant resolve among Canadian businesses to press back," he says. To be sure, Trump's trade war is doing real damage to Canada — and, it should be said, to the US. Continuing the tit-for-tat won't mean mutually assured destruction for the neighboring countries, but it is one that will harm both, even if to different degrees. Canada's 40 million population can't replace the US's 340 million in terms of a consumer market. It will continue to depend on the US and, increasingly, others for commerce and trade. And the idea of a complete decoupling is quite unfathomable, unless Americans want to spend a ton more on energy and the entire North American auto sector is overhauled. At the moment, Canadians are fired up and holding their own. They don't appear to be poised to back down anytime soon — or to forget what's happening now. "Our elites need to wake up to the full nightmare of what Donald Trump's administration means in terms of trade," Karaguesian says. Much of the Canadian population already has — and years down the line, it could very well be to their country's benefit. Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
21-07-2025
- Business
- Business Insider
Canada First, Eh!
The whole thing about Canadians is that they're remarkably nice. Except lately, they haven't been feeling so warm and fuzzy, namely toward their neighbors to the south. Given everything that's going on — President Donald Trump's on-and-off trade war, his remarks about making the country the 51st state — Canada has a right to be annoyed with the United States. If your longtime bestie suddenly turned on you for no apparent reason, you'd be miffed, too. The US's sudden shift to frenemy status is going to cause some pain for Canada in the near term, especially as it stands to be a big economic loser from Trump's tariff tantrum. But ultimately, the turmoil may be a blessing in disguise for the Canucks. It's an opportunity for the country to step out of the star-spangled shadow and do its own thing. "It's really kind of a decoupling moment that is scary to watch in the short term. In the medium to long term, I have to say, it's an important wake-up call for Canada," says Matthew Holmes, the chief of public policy at the Canadian Chamber of Commerce. "If I look back on this in 20 years, I hope to be able to say that this woke Canada up to the need to be a little more strategic and have a little bit more of its own agency in the economy and in the kind of economy we want." If the US doesn't want to be as good of friends anymore, fine, Canada can make new, better friends, anyway. The US and Canadian economies are deeply intertwined. A shared language, geographic proximity, and interconnected supply chains have made the countries convenient strategic partners for decades. Three-quarters of Canada's exports go to the United States, and nearly half of its imported goods come from the US. In 2024, Canada was the third-largest source of imports to the US, behind China and Mexico. Canada was also the top destination for exports from the US. Several of the two countries' biggest industries, including automotives and energy, are highly interwoven with one another. Trump's belligerent stance toward Canada has thrown the country for a loop. While Canada isn't subject to the 10% blanket tariffs he's placed on imports from other countries, he's targeted specific areas with import taxes, including 50% tariffs on steel and aluminum, 25% tariffs on cars, 10% tariffs on potash and energy, and 25% tariffs on imports not compliant with the US-Mexico-Canada trade deal (formerly known as NAFTA). He's also planning to place a 50% tariff on copper come August. Most recently, the president threatened to put a 35% tariff on imports from Canada, blaming its retaliatory tariffs for the move, though it wasn't immediately clear what goods this would apply to. (The president says this is about fentanyl, though very little fentanyl comes to the US over the Canadian border.) A Trump administration official said in an email that they expected goods currently tariffed at 25% to go up to 35%, though no final decisions have been made by the president. Given Trump's persistent flip-flopping on tariffs, it's not clear whether they will actually take hold. This constant state of flux is making investors, at the very least, a bit more casual about the whole thing. The foreign exchange market, which tracks currency fluctuations, would indicate investors aren't too worried about it — the Canadian dollar isn't swinging based on Trump's pronouncements and has strengthened in recent months. "The market, so to speak, is seeing through a lot of this rabble-rousing," says Peter Morrow, an economist at the University of Toronto. The TACO trade — which is short for Trump Always Chickens Out and proxy for the idea that the president backs down from his most aggressive threats — is alive in the Great White North, too. People won't remember in 10 years why they don't like Nike anymore, but they will still think slightly ill of it. Regardless, the American president's trade antics are taking a toll on Canada. It's the country most hurt by the US trade war so far — the US is second. An analysis from the Yale Budget Lab found Trump's tariffs and Canadian countermeasures could cause Canada's economy to shrink by 2.1% in the long term. The trade dispute increases the chances of a recession in Canada, and it threatens to increase inflation. It also injects an incredible amount of uncertainty into the economy. It's next to impossible for Canadian businesses to plan for the future when they have no idea what the guy in the White House is going to do, day-to-day. "It's not only the tariff wall; it's kind of a wall of uncertainty that's going up between the two countries," says Julian Karaguesian, a course lecturer in McGill University's economics department. "The immediate effect it's having in the short term is a cooling effect on business investment, which is the dynamic part of the economy." Canada isn't taking the economic punch in the face lying down. Canada's new prime minister, Mark Carney, and the Canadian public have taken a hockey-esque "elbows up" approach to the US. A " Buy Canadian" movement has swept the nation. Canadians are swapping out American-made products and groceries for national ones, guided by forums and apps that help distinguish locally made goods from their Yankee counterparts. Liquor stores have pulled American whiskeys off the shelves. Instead of going to McDonald's, Canadians are hitting up A&W. They're opening up the CBC Gem streaming app to see what's on there instead of Netflix. "Brand damage can last a long time. People won't remember in 10 years why they don't like Nike anymore, but they will still think slightly ill of it," a guy who runs a website called Shop Canadian Stuff tells me. He spoke with me on the condition of anonymity, because his job doesn't know about his nationalist side hustle. Evan Worman, one of the moderators of a Buy Canadian subreddit, tells me that Canadians redirecting their purchasing power is a loss for the US because it's opening people's eyes to the quality of non-American stuff. "People are going to find a lot of the products that are getting imported from Europe have better safety standards, have higher quality control than the US, and it doesn't come with all the hang-ups and baggage of buying from somebody who wants to invade you," he says. Worman is originally from Alaska and has lived in Canada for a decade. When people don't realize he's not Canadian, he doesn't correct them. "People are genuinely very angry at us right now," he says. The attacks are also fostering a willingness to reshape the domestic Canadian economy: Local governments are getting rid of internal trade barriers that have prevented goods from flowing between provinces. "We've had, for decades, stupid, unnecessary rules between Canadian provinces," says Dan Kelly, the president of the Canadian Federation of Independent Business. "There has been a resurgence of that among our members that are now saying, 'Well, wait a minute, if the US market is uncertain, then I'll send my goods to Ontario rather than to New York.'" The federal government says knocking down interprovincial trade restrictions could boost Canada's economy by $200 billion annually. Karaguesian believes that may be an overstatement, but that and the domestic focus are emblematic of a bigger shift. "The people that are running the United States are saying we don't really have any allies right now — we have adversaries, and we have countries we can tell what to do," making the emphasis on a more unified Canadian economy all the more important, he says. Also on the shorter-term front, many Canadian businesses that hadn't yet bothered to get compliant with the US-Mexico-Canada Agreement because previous tariff levels were so negligible are getting their ducks in a row. Holmes, from the Chamber of Commerce, says that pre-Trump, only about half of the products crossing the border were USMCA compliant, because companies hadn't bothered to do the paperwork, but over the past four months, that's gotten to about two-thirds. He estimates that 90% of Canadian products should be compliant overall but notes that "it's just the work of getting it done." Canadian companies aren't rushing to move their operations to the US — which seems to be, in large part, Trump's goal in all of this — but they are adapting. "They're diversifying their sales, and they're diversifying their suppliers," says Patrick Gill, the vice president of the Business Data Lab at the Canadian Chamber of Commerce. "And so they're looking to other international markets where Canada has established free trade agreements." The United States' attitudes have sent Canada seeking improved trade agreements and relations elsewhere, including Europe, Asia, and the Global South. In an attempt to wean itself off the US, Canada is looking to expand where it sources from and where it sells. But just how far to go is a difficult calculation. "Some people say that Canada should take the easy win, stay linked to the US, and just ride it out. And there's other people who say that the United States is not a reliable trading partner anymore, and that Canada should strengthen its relationships with other countries. But developing those other relationships is not easy," says Morrow, from the University of Toronto. Canada has a strong skepticism of the US even during the best of times. Canada may be at its breaking point. Canadian political leaders and nationals feel like the US will never be satisfied, no matter how much ground they give. They find the 51st state jokes really offensive. And as much as the US-Canada relationship is extra strained right now, Canadians have long been skeptical of their larger neighbors. The US-Canada free trade agreement that predated NAFTA in the late 1980s was unpopular in Canada. Post-9/11, Canada resisted pressure from the US to join the Iraq invasion and chafed at President George W. Bush's "you're with us or against us" mentality. Some Canadian policymakers felt slighted by the Obama administration's attempts at pushing "Buy American" provisions and by the US-focused investments in the Biden administration's Inflation Reduction Act. The US and Canada have long grumbled over dairy and lumber. "Canada has a strong skepticism of the US even during the best of times," Morrow says, citing a quote from former Canadian Prime Minister Pierre Trudeau (Justin's father), who said living next to the US was like "sleeping with an elephant — no matter how friendly or even-tempered is the beast, if one can call it that, one is affected by every twitch and grunt." "The United States, for its entire history, has been a protectionist country except the time from the attack on Pearl Harbor in 1941 to the 9/11 attacks," Karaguesian says. "The United States was the biggest defender of free trade at the turn of the century because they were winning at that game." Trump says the US has "all the cards" in trade relations with Canada. The US certainly has more cards, but Canada isn't playing with an empty hand. The country has felt emboldened to strengthen trade relations with other partners, to revive its own manufacturing base, and to separate itself economically, culturally, and otherwise from the US. Kelly, from CFIB, compares Canada's retaliatory tariffs to economic chemotherapy — "you take the poison in order to try to fight the larger battle" — and adds that it says something that the country is so willing to dig in. "There is fairly significant resolve among Canadian businesses to press back," he says. To be sure, Trump's trade war is doing real damage to Canada — and, it should be said, to the US. Continuing the tit-for-tat won't mean mutually assured destruction for the neighboring countries, but it is one that will harm both, even if to different degrees. Canada's 40 million population can't replace the US's 340 million in terms of a consumer market. It will continue to depend on the US and, increasingly, others for commerce and trade. And the idea of a complete decoupling is quite unfathomable, unless Americans want to spend a ton more on energy and the entire North American auto sector is overhauled. At the moment, Canadians are fired up and holding their own. They don't appear to be poised to back down anytime soon — or to forget what's happening now. "Our elites need to wake up to the full nightmare of what Donald Trump's administration means in terms of trade," Karaguesian says. Much of the Canadian population already has — and years down the line, it could very well be to their country's benefit.
