Prime Minister Mark Carney says Canada is “at war” with the U.S. over trade after negotiations to avoid new tariffs on Canadian imports collapsed.
Catch up: In an address to the nation on Saturday, Carney said the U.S. derailed trade talks by adding last-minute demands that were unacceptable and suggested that he no longer trusted American commitments, saying they were “written in pencil.”
Canada will impose retaliatory tariffs on U.S. imports beginning September 8 if the U.S. tariffs remain in place.
Why it matters: The new so-called section 338 tariffs imposed by Donald Trump will raise duties to 50% on hundreds of goods amounting to around 5% of Canada’s exports to the U.S.
Electronics, electrical equipment, chemicals, plastics, furniture, and wood products will all be hit particularly hard. Exporters of steel, aluminum, lumber, and autos will also be punished, as these levies layer on top of existing sector-specific tariffs.
B.C., Ontario, and Quebec will bear the brunt of the costs, as they’re the provinces with the highest proportion of affected exports to the U.S.
What’s next: Canadian officials have not detailed what products will be affected by retaliatory tariffs, but analysis by RBC Economics suggested that they could be designed to encourage more domestic buying of goods that have been targeted by U.S. tariffs.
Because Canada imports more of the targeted goods from the U.S. than it exports, “redirecting imports of these specific products to instead purchase from Canadian sellers that otherwise would have been shipping to the United States mechanically could actually fully replace lost U.S. exports.”
Yes, but: In practice, aggregate numbers likely do not paint an accurate picture of how painful the tariffs will be in targeted sectors that depend on complex, cross-border supply chains. Economist Trevor Tombe estimates that 90,000 jobs in Canada will be lost if the tariffs remain in place, including in sectors and provinces not directly targeted.—TS
