North American Trade Tensions: President Trump Threatens 100% Tariffs on Canadian Goods

On Saturday, U.S. President Donald Trump issued a threat to levy 100% tariffs on goods from Canada in retaliation for the neighboring nation's budding trade partnership with China. The statement indicated that duties on imports from Canada would take effect immediately if Ottawa finalizes a preliminary trade deal with Beijing announced earlier this month.

In a post on the social media platform Truth Social on Saturday, Mr. Trump declared: “If Canada makes a deal with China, it will immediately be hit with a 100% Tariff against all Canadian goods and products coming into the U.S.A.”

Currently, Mr. Trump has not provided further specifics regarding these potential levies.

Causes of the Tension

Earlier this month, Canada and China reached a “preliminary agreement in principle” aimed at lowering tariffs and expanding market access for goods from both nations. Under the terms of the pact, China is expected to reduce duties on certain Canadian food exports, including canola seed, while Canada stated it would lower tariffs on an annual quota of 49,000 Chinese-made electric vehicles (EVs).

Many provisions of the pact are scheduled to take effect in March. It remains unclear whether Mr. Trump’s threat applies immediately upon the preliminary deal or targets the aforementioned March timeline.

In his post, Mr. Trump argued that the proposed deal would turn Canada into a “drop off port” for China to evade U.S. trade barriers.

Canada’s Response and USMCA Commitments

Responding to these concerns, Canadian Prime Minister Mark Carney stated on Sunday that the preliminary agreement with China is solely intended to remedy “issues that developed in the last couple of years” and does not serve as a framework for a comprehensive free trade agreement (FTA).

Mr. Carney emphasized that such an agreement would violate the terms of the United States-Mexico-Canada Agreement (USMCA), known as CUSMA in Canada.

He affirmed: “We have commitments under CUSMA not to pursue free trade agreements with non-market economies without prior notification.”

“We have no intention of doing that with China or any other non-market economy.”

Impact on Supply Chains and Inflation

According to Professor Jason Miller, a supply chain management expert at Michigan State University, if Mr. Trump executes the tariff threat on Canadian goods, it “would result in a significant inflationary spike” in the United States.

However, considering the reality of cargo flows, Professor Miller assessed in a LinkedIn post: “Do I think there is any chance POTUS goes through with this threat, especially for energy products? Absolutely no chance.”

Mr. Miller noted that crude oil, automobiles, and auto parts are among the top exports from Canada to the U.S., and imposing tariffs on these items would inflict major damage on the U.S. economy itself.

Although Mr. Trump applied a 35% tariff on goods from Canada last summer, products eligible for USMCA preferences were exempted. According to Professor Miller, the effective tax rate on all Canadian imports was just 3.89% as of October.

This is not the first time tariffs have been used as a geopolitical bargaining tool. Last week, Mr. Trump also threatened new tariffs on eight European nations opposing his bid to acquire Greenland. While that threat was subsequently withdrawn, the European Union (EU) had already moved to suspend a trade agreement framework that was formalized in August.

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Source: Phaata.com (According to Supply Chain Dive)

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