After a month’s reprieve, Donald Trump’s punishment against Canada for trade deficits and perceived lax border security has arrived.
What happened: The 25% U.S. tariffs on Canadian goods and 10% tariffs on Canadian energy come into effect today. The feds are expected to respond with 25% counter-tariffs affecting $30 billion worth of goods to start and $125 billion worth of goods three weeks later.
Why it matters: There are no two ways about it; the trade war will cause economic chaos, with a hit of up to 4.2 percentage points to Canada’s annual GDP on the table. The pain already began yesterday, with the loonie dropping below $0.69 and the TSX cratering after Trump said the tariffs were a go.
What’s next: The path to ending the trade war is murky, with Trump saying there’s “no room left” to negotiate. It seems that even after launching a $1.3 billion plan to strengthen border security and appointing a fentanyl czar, Canada still hasn’t done enough in his eyes.
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The head of the Canada Border Services Agency told the Globe and Mail it’s unclear what else the agency could do to change Trump’s mind.
Big picture: It might not be possible to meet Trump’s expectations, given his exaggerated view of fentanyl smuggling. The head of the RCMP says there’s no data showing mass quantities coming from Canada. Meanwhile, the White House’s stats are highly questionable.—QH