Canada retaliates, puts tariffs on $144b of US products

OTTAWA – The Canadian government announced a sweeping package of counter-tariffs against US-made products after President Donald Trump

confirmed that his administration will go ahead with levies against Canada and Mexico on March 4. 

“Canada will not let this unjustified decision go unanswered,” Prime Minister Justin Trudeau said in a statement late on March 3. The retaliation plan on C$155 billion (S$144 billion) is the same as the one he announced in February after Mr Trump signed his executive order for broad tariffs. 

The first stage is 25 per cent tariffs on about C$30 billion worth of goods from US exporters, and will go into effect at 12.01am New York time unless the US drops its tariffs, Mr Trudeau said.

A second round of tariffs at the same rate will be placed on C$125 billion of products in three weeks – a list that will include big-ticket items such as cars, lorries, steel and aluminium. 

“Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Mr Trudeau said. 

The retaliatory measures were expected after Mr Trump said earlier there was no way for Canada and Mexico to avoid the broad tariffs he has been threatening since he was elected in November.

It is a trade war that will disrupt one of the world’s largest bilateral trade relationships, worth more than US$900 billion (S$1.2 trillion) in annual goods and services.

Canada is the largest single buyer of US goods, and vice versa. 

The Canadian dollar and stocks tumbled, with the benchmark S&P/TSX Composite Index falling 1.5 per cent, the most since Dec 18.

Traders in overnight swaps increased bets the Bank of Canada would cut interest rates by 25 basis points at its March 12 meeting, rising to nearly 80 per cent from about a coin flip.

Mr Trump’s executive order, signed on Feb 1, calls for 25 per cent tariffs against most of what the US imports from Canada and Mexico and 10 per cent on Canadian energy products such as crude oil, natural gas and uranium.  

The Bank of Canada has warned that a prolonged tariff war has the potential to chop Canadian output by nearly 3 per cent over two years and “wipe out growth” during that period.

Demand for Canadian goods in the US would suffer, exporters would cut production and jobs, prices for products imported from the US would rise, and consumers and businesses would spend less.

Mr Trudeau, who is set to leave office in a matter of days, returned on March 3 from a trip to London, where he met with British Prime Minister Keir Starmer and other leaders. 

“Businesses on both sides of the border have already been damaged by the uncertainty coming from President Trump’s drip-drip-drip of tariff threats,” Mr Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, said in a statement.

“We will have a long road back to Canada and the US being trusted economic partners again. Businesses can’t just switch their whole model to avoid tariffs and then go back again, depending on what politicians decide on any given day,” he said.

Mr Trump’s executive action alleged that Canada allows too much fentanyl to flow over the border.

Canadian officials say that is simply not true – pointing to US government data that shows far less than 1 per cent of the illicit opioid that’s seized by US border agents is found at or near the northern crossing. 

Still, Mr Trudeau’s government announced a C$1.3 billion plan to beef up border security by adding more aerial surveillance through helicopters and drones.

It included a pitch for a new North American joint “strike force” to tackle the fentanyl trade.

The Prime Minister has also appointed a so-called fentanyl czar and increased the number of personnel available to patrol the border, and promised further measures to crack down on organised crime. 

Canada’s provinces are also prepared to retaliate against the US. 

“A tariff on Canada is a tax on Americans,” Ontario premier Doug Ford said at a mining convention in Toronto on March 3. “If they’re going to try to annihilate Ontario, I will do everything – including cutting off their energy – with a smile on my face. I’m encouraging every other province to do the same.”

Ontario and other provinces have promised to limit or shut out US companies from government contracts, with Mr Ford reiterating that he would end his province’s contract with Starlink, the satellite network controlled by billionaire Elon Musk.

And in a new threat, the Ontario premier said he was prepared to cut off nickel exports to the US.

“It will shut down manufacturing because 50 per cent of the nickel you use is coming out of Ontario,” the provincial leader said in an interview with NBC News.

Canadian Cabinet ministers, provincial premiers and other policymakers have made repeated trips to Washington in recent weeks to talk about the border and to urge US lawmakers and members of Mr Trump’s team not to impose the tariffs. 

Canadian Foreign Minister Melanie Joly said government officials have had good conversations with members of the Trump administration.

But “there’s a level of unpredictability and chaos that comes out of the Oval Office, and we will be dealing with it”, she said. 

Immigration Minister Marc Miller said earlier March 3 that there is “no question” tariffs will be painful for the Canadian economy. 

“We will have to bring the fight, and it will hurt Americans as well. It’s important to reiterate that 35 of those states, their primary trading partner is Canada, so it will hurt them. And we hope the logic will prevail.” Bloomberg