How seriously should we take Trump’s tariff threat, and how might it affect Canadians?
Donald Trump has threatened to impose a 25 percent tariff on all products entering the country from Canada and Mexico.
The president-elect of the United States said this on Monday on the social networking site Truth Social, saying that the tax will be one of his first orders when he takes office on January 20 as part of his effort to end illegal immigration and drugs.
The news left politicians scrambling, sending the loonie diving, and economists warning of a negative impact, saying the move could fuel inflation and have a negative impact on supply chains.
But how does all this affect you? Is it a serious threat? And when we ask … what do I mean is something tax? Listen, there is no judgment here. Take a coffee.
Former Conservative industry minister James Moore breaks down how Donald Trump’s threatened 25 per cent tariff will hurt Canada’s economy. Also, About That by Andrew Chang joins National to break down VIA Rail’s ongoing operational woes and connection to declining revenue.
What is tax?
Tariffs are taxes on imports, usually charged as a percentage of the price the buyer pays the foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country.
For example, the tax on passenger cars is 2.5 percent; in golf shoes, it is six percent.
Taxes may be lower in countries that have trade agreements with the United States. Many goods can move between the United States, Mexico and Canada duty-free thanks to the United States-Mexico-Canada Agreement that went into effect during Trump’s first term in office.
Who pays them?
Trump insists that the prices are paid by foreign countries. In fact, it is the importers – American companies – who pay the prices, and the money goes to the US Treasury.
However, companies often pass the increased costs on to their customers in the form of higher prices. That’s why economists say that consumers usually end up paying the tax.
Tariffs can hurt foreign countries by making their products more expensive and harder to sell abroad.
How can hiking affect the Canadian economy?
The US is Canada’s largest trading partner. About 60 to 70 percent of Canada’s total trade is with the United States, explained Ian Lee, an associate professor at the Sprott School of Business at Carleton University in Ottawa.
Lee says Trump’s proposed US tariffs on Canadian products would be “catastrophic” for the Canadian economy and currency. Two-thirds of Canada’s GDP depends on trade, he said CBC news network Monday evening.
According to Canada’s State of Trade 2024 report, exports alone support nearly 3.3 million Canadian jobs – nearly one in six. Just under 2 million jobs in Canada depend on US exports, Lee explained.
“The consequences will be dire for Canada,” Lee said. “There’s no way to sugarcoat this, it’s just bad news.”
The Bank of Canada said on Tuesday that if Trump follows through on the threat, it will have an impact on both economies. Economists say it could fuel inflation, depress growth and distort the trajectory of interest rates in Canada.
Will Canada fight it?
Prime Minister Justin Trudeau and the country’s prime ministers will hold an emergency meeting on Wednesday to discuss the threat of new US tariffs and plan what Trudeau called a “team Canada” response.
On Tuesday, Trudeau said he had a good phone call with the US president-elect on Monday night, noting the active communication between the two countries.
Trudeau also spoke with Ontario Premier Doug Ford, who chairs the Council of the Federation, and other premiers last night.
Ford has written to Trudeau asking for an urgent meeting to discuss a unified approach on everything from trade and border security to energy, defense and cross-border supply chains.
On Tuesday, Ford said the threat felt, “like a family member stabbing you in the heart.” He also added that Canada will have no choice but to retaliate if the incoming Trump administration continues with these tariffs.
Meanwhile, the Canadian Chamber of Commerce said Canada needs to urgently adjust its approach to trade negotiations with the US.
Should we take the threat seriously?
It’s not the first time Trump has made late-night announcements that have sparked a backlash.
François-Philippe Champagne, Canada’s minister of innovation, science and industry, said on Monday that they take Trump’s threat seriously and will begin discussions on topics such as the effect it will have on the US economy and, in particular, the energy sector.
Trump is not president for another two months “so we still have a couple of weeks to engage,” he said.
“Down there, we’re going to do what we always do and stand up for Canada and stand up for the workers.”
As the economy of Windsor, Ont. Heavily tied to cross-border trade and the auto industry, Mayor Drew Dilkens is reacting to US president-elect Donald Trump’s announcement that he will impose a 25 percent tariff on goods coming into the United States from Canada. and Mexico. Dilkens called for a strong Canadian response to Trump’s ‘potential negotiating tactic’ and said, ‘There are a lot of jobs at stake if this is not done right.’
Gordon Giffin, former US ambassador to Canada, said CBC news network Tuesday that it’s Trump’s style to make bold announcements late at night on social media.
“My sense — not based on facts, obviously — is that this is intended to cause action and activity in the two months between now and the time he takes office,” Giffin said.
In Windsor, Ont., where the economy is heavily tied to cross-border trade and the auto industry, Mayor Drew Dilkens called for a strong Canadian response to what could be a ‘negotiating tactic’ by Trump.
“Many jobs are at risk if this is not done properly,” he said.
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