Canada is gearing up for an extensive array of retaliatory tariffs against U.S. products if former U.S. President Donald Trump follows through on his threats to impose a 25% tariff on Canadian exports. According to government insiders, the Canadian government is exploring more comprehensive countermeasures than it did during the trade dispute in 2018.
Back in 2018, Canada targeted specific U.S. goods such as bourbon whiskey from Kentucky and other products from Republican-dominated regions in the U.S. The move was strategically aimed at creating political pressure within Trump’s support base. This time, however, Canadian officials are prepared to take broader action, potentially affecting a wide range of U.S. exports, including products like Florida orange juice, in retaliation.
Prime Minister Justin Trudeau’s administration is considering a “dollar-for-dollar” tariff strategy. One government official indicated that a list of almost every U.S. product exported to Canada is being circulated internally. The aim is to ensure that Canada’s response matches the scale of any tariffs imposed by the U.S.
However, Canadian officials acknowledge that fully matching the value of tariffs could be challenging if Trump targets all Canadian exports. A second government source mentioned that in a worst-case scenario, Canada would look for ways to inflict economic pain on U.S. exporters, despite the difficulty of a complete value match.
Officials stress that Canada’s response will depend on the actions taken by Trump once he assumes office. The Canadian government is still holding out hope for diplomacy to avoid an all-out trade war, emphasizing that it is taking U.S. concerns about border security seriously.
Trump’s recent remarks about Canada during a press conference—where he threatened to use “economic force” and suggested that Canada should become the 51st U.S. state—have caused a stir in Ottawa. Trudeau’s government views the rhetoric as a distraction tactic to shift attention from the potential negative economic consequences of Trump’s proposed tariffs.
In a CNN interview, Trudeau dismissed Trump’s annexation comments, suggesting they were intended to divert focus from the higher consumer prices that would result from a trade conflict. “What I think is happening is that President Trump, who is a skilled negotiator, is using this rhetoric to distract people from the real economic impacts of his tariff policies,” Trudeau said.
The Canadian prime minister, who has announced he will not lead the Liberal Party into the next election and will step down in March, remains focused on defending Canada’s trade interests. Canada is the largest national buyer of U.S. goods, importing approximately $320 billion worth of products in the first 11 months of last year. The U.S.-Canada trade relationship, valued at over $900 billion annually, is critical for both economies.
While retaliatory tariffs would send a strong message to the U.S., they could also have significant repercussions for the Canadian economy. Economists from the Bank of Nova Scotia estimate that a 25% U.S. tariff on Canadian goods could reduce Canada’s GDP by up to 3.8%. If Canada opts for full-scale retaliation, the GDP impact could rise to 5.6%, though the damage would accumulate over several years.
Despite the risks, some Canadian officials believe the economic cost of not retaliating could be even greater. “Retaliation increases the economic cost in the U.S., which could make them reconsider their approach,” said Trevor Tombe, an economics professor at the University of Calgary.
The Trump transition team remains firm on their stance. Brian Hughes, a spokesperson for the team, stated that Trump will prioritize policies aimed at protecting American manufacturers and workers from what he views as unfair foreign trade practices. “President Trump will implement economic and trade policies to make life more affordable and prosperous for Americans,” Hughes said.
Trudeau’s government is debating whether to publish a list of potential counter-tariffs before Trump’s inauguration. However, officials remain cautious, recognizing the uncertainty surrounding Trump’s actual trade policies.
One area of concern for Canadian officials is the energy and metals sector. Trudeau’s government is exploring the possibility of export taxes on key commodities like oil, uranium, and potash, which would immediately affect American energy prices.
There are also fears of another clash over steel and aluminum. The U.S. steel industry, which has been lobbying for new tariffs, claims that Mexican steel transshipments are undermining American producers. Although Canada has not faced similar accusations, aluminum trade tensions remain high, with U.S. producers arguing that Canadian companies benefit from favorable shipping and logistics costs.
Canadian officials are preparing for all possible scenarios but hope to avoid a repeat of the 2018 trade conflict. The stakes are high, as both nations stand to lose from a prolonged trade war. Nevertheless, Canada is determined to defend its economic interests and ensure that any punitive measures by the U.S. are met with a firm response.
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