According to Bloomberg, the Canadian government announced a comprehensive counter-tariff plan for U.S. products after U.S. President Trump confirmed that the United States will begin imposing new tariffs on Canada and Mexico on March 4.
The executive order signed by Trump on February 1 requires the U.S. to impose a 25% tariff on most products imported from Canada and Mexico, and a 10% tariff on Canadian energy products such as crude oil, natural gas and uranium.
“Canada will not sit idly by the unjust decision,” Canadian Prime Minister Justin Trudeau said in a statement. Justin Trudeau said that in the first phase, Canada will impose a 25% tariff on approximately CAD$30 billion (about US$20.6 billion) worth of US products, including orange juice, peanut butter and coffee, and will be implemented at 12:01 midnight on March 4, NY time, unless the United States cancels tariffs on Canada. Three weeks later, Canada will impose a second round of the same tariff on US products worth CAD 125 billion, with a product list that will include cars, trucks, steel and aluminum.
“Canadian tariffs on the United States will remain until the U.S. trade action is revoked. If the U.S. does not revoke tariffs, Canada is actively and ongoing discussions with provinces and territories to take several non-tariff measures,” Justin Trudeau said.
The above-mentioned Canadian countermeasures are the same plans announced by Justin Trudeau after Trump signed a broad tariff executive order in February, and are expected, as Trump earlier said Canada and Mexico could not circumvent the wide range of tariffs he has threatened to impose since he was elected U.S. president in November. The trade dispute will disrupt one of the world’s largest bilateral trade relations, with Canada and the United States having more than $900 billion in annual trade in goods and services. Canada is the largest single buyer of U.S. goods and vice versa.
The Bank of Canada warns that if the U.S. imposes long-term tariffs on Canada, Canadian production may drop nearly 3% within two years. U.S. demand for Canadian goods will be hit, exporters will cut production and employment, prices of products imported from the U.S. will rise, and spending for consumers and businesses will also decrease.
After the above report was released, the Canadian dollar fell, with the benchmark S&P/TSX comprehensive index falling 1.5%, the largest single-day drop since December 18 last year.
In addition, Mexican President Claudia Sheinbaum said that the Mexican government will wait for Trump’s final decision before taking countermeasures. China’s Commerce Department said in a statement that China will take necessary countermeasures to defend its rights and interests from U.S. tariffs. The Chinese Embassy said in a written statement: “The unilateral increase in tariffs in the United States seriously violates WTO rules and is a typical unilateralism and trade protectionism.” In addition, China also stated that the United States should focus on “reducing domestic drug demand” and strengthen law enforcement to curb the use of fentanyl in the United States.