Trump’s Tariff Threats Rekindle Trade Fears Across North America

Trump’s Tariff Threats Rekindle Trade Fears Across North America

In a dramatic twist reminiscent of his first presidency, President-elect Donald J. Trump has once again turned to tariffs as his weapon of choice. This time, he’s threatening to impose a sweeping 25 percent tariff on all Canadian exports to the United States. The announcement sent shockwaves through diplomatic channels, prompting a swift response from Canadian Prime Minister Justin Trudeau, who flew to Mar-a-Lago for a high-stakes dinner with Mr. Trump. The meeting, attended by top aides from both governments and lasting three hours, ended with little clarity on what—if anything—had been achieved.

The tariff playbook is nothing new for Mr. Trump. During his first term, he imposed tariffs on aluminium and steel imports from Canada, Mexico, and the European Union under the guise of national security. While Canada eventually negotiated an end to those duties, the experience left scars. Mr. Trudeau’s government had to weather a brief period when the aluminium levy was reimposed, a move that rattled industries on both sides of the border.
Even now, experts remain uncertain whether Mr. Trump’s latest tariff threat is a serious policy proposal or another of his trademark negotiating tactics.

The repercussions are real in either case.
"The threats mirrored Mr. Trump's first term, when he jumbled the nation's diplomatic and economic ties, and provided a sneak peek at what might be another four years of trade turmoil."
The economic ties between the United States and Canada are intricate and deeply rooted in history, today reaching 4 billion daily

The United States supported Alberta's oil and gas sector's expansion during the Cold War, ensuring a steady supply of energy.
Today, Canada supplies about 60 percent of U.S. oil imports, much of it flowing through pipelines from Alberta.
Despite America’s resurgence as the world’s largest oil producer—thanks to fracking—many U.S. refineries remain configured to process the heavy crude from Alberta rather than the lighter oil extracted domestically

Similarly, the auto industry remains a symbol of cross-border integration. A managed trade agreement between then-Prime Minister Lester B. Pearson and President Lyndon B. Johnson in 1965 merged the Canadian and U.S. car industries, creating a mutually beneficial arrangement that endures to this day.Yet, this interdependence also exposes vulnerabilities.
​If Mr. Trump’s tariffs come to pass, the pain will be felt on both sides of the border.
American motorists could face higher gas prices, U.S. refineries might see shrinking profit margins, and Canadian crude oil would likely fetch lower prices on the global market. Compounding the problem is Canada’s limited access to other export markets, leaving the country in a weak bargaining position.

The reaction to Mr. Trump’s announcement has been starkly different in Ottawa and Mexico City. President Claudia Sheinbaum of Mexico wasted no time in issuing a fiery response, hinting at possible trade retaliation. In contrast, Mr. Trudeau called for calm, expressing confidence that his government could work out a resolution with Mr. Trump. Still, the threat appears to have sowed discord. Some suggest that Mr. Trump’s move could drive a wedge between Canada and Mexico, two nations that had previously stood together during tense negotiations over the United States-Mexico-Canada Agreement (USMCA).

In Canada, the tariff threat has also reignited debates about the country’s trade strategy. Doug Ford, Ontario’s premier, has floated the idea of revisiting the Canada-U.S. Free Trade Agreement, a bilateral deal that predates NAFTA. Mr. Trudeau and his officials, however, have been quick to downplay that notion, emphasizing the importance of a united North American trade framework​.

Beyond the political drama, the economic stakes are immense. Experts estimate that the proposed Canada tariffs alone would raise costs for American households by about $2,000 annually. This is because nearly 79 percent of Canadian exports to the United States consist of raw materials, machinery, or intermediate goods used in American manufacturing. Disrupting this supply chain would ripple through industries, driving up production costs and, ultimately, consumer prices.

As the dust settles from this latest round of tariff threats, one thing is clear: the road ahead could be as tumultuous as Mr. Trump’s first term. Whether his gamble results in concessions or chaos remains to be seen. But for now, businesses and governments on both sides of the border are bracing for impact.

Sarge