A senior Canadian government official stated that Prime Minister Justin Trudeau will agree to remove retaliatory tariffs only if the U.S. eliminates all its tariffs against Canada. This position was expressed in response to a proposal from U.S. Commerce Secretary Howard Lotenik, suggesting a middle ground in the trade war between the two countries.
According to the official, who wished to remain anonymous, Trudeau opposes any scenario that would force Canada to reduce or remove its retaliatory tariffs in exchange for a minor reduction in U.S. tariffs.
U.S. Tariffs and Canada’s Response
The Trump administration has imposed a 25% tariff on Canadian goods imported to the U.S., with some products like oil and natural gas subject to a 10% tariff. In retaliation, Canada has imposed tariffs worth CAD 30 billion (USD 20.8 billion) on American products such as cosmetics, tires, and fruits.
However, the Trump administration announced on Wednesday that U.S. automakers will be exempt from these tariffs for one month. This decision was made under the United States-Mexico-Canada Agreement (USMCA), a deal signed in 2020.
Escalation of Trade Tensions; Canada’s Tariffs Expanding
Canada has announced that the second phase of retaliatory tariffs will be implemented by the end of March. These tariffs will apply to an additional CAD 125 billion worth of U.S. exports, including:
- U.S.-made cars and trucks
- Aluminum and steel
- Food and agricultural products
Contradictory Reactions from U.S. and Canadian Officials
Lotenik, U.S. Secretary of Commerce, stated in an interview with Bloomberg that Trump may reduce some tariffs, including those on the automotive industry, by April 2. He emphasized that the U.S. government is seeking a “balance” in its trade policies.
However, Trudeau rejected this argument, stressing that the new U.S. tariffs are not related to trade but are aimed at exerting economic pressure on Canada. He stated:
“Trump is trying to collapse the Canadian economy because this would make annexing us easier for him.”
Trade War or War on Drugs?
Lotenik also referred to the tariffs as “tools in the fight against fentanyl entering the U.S.” He claimed that these measures were taken to reduce drug overdose deaths in the U.S.
Trudeau rejected this claim, pointing to U.S. border data showing that illegal fentanyl trafficking from Canada is minimal. He also reminded that in December, the Canadian government allocated CAD 1.3 billion to enhance border security and combat organized crime.
Crisis in U.S.-Canada Diplomatic Relations
Trump and Trudeau spoke on the phone on Wednesday, but the conversation further intensified the rift between the two countries. Trump once again referred to Trudeau as the “Premier of Canada,” a phrase many considered disrespectful to the position of Canadian Prime Minister.
In response, Canada’s Minister of Energy Jonathan Wilkinson emphasized that these policies have permanently damaged the historical relationship between the two countries. He said:
“Even if the tariffs are lifted, our trust in the U.S. will never be the same.”
Expansion of Trade Tensions and Its Economic Impact on Both Countries
As tensions continue, economic analysts warn that a prolonged tariff war could have devastating effects on both countries’ economies. According to the Canadian Chamber of Commerce, the tariffs have already increased the cost of imported raw materials for Canadian manufacturing industries by 12%. This has especially impacted industries like automotive, steel, and agriculture, raising production costs.
Meanwhile, in the U.S., sectors dependent on exports have been harmed by the Trump administration’s tariff policies. Major automakers such as General Motors and Ford have warned about the negative impacts on their supply chains. According to a Brookings Institution analysis, if this trade war continues, U.S. economic growth could decrease by up to 0.3% next year.
Additionally, trade disputes between the two countries have exacerbated uncertainty in financial markets. The Toronto Stock Exchange experienced significant volatility last week, with investors refraining from new investments due to concerns over the future of trade relations. Some experts believe that if no agreement is reached, this situation could lead to an economic recession in parts of both countries’ economies.
Given these circumstances, experts recommend that both countries move toward new negotiations to achieve a sustainable trade agreement rather than continuing retaliatory policies. However, the hardline stances of both parties make reaching such an agreement challenging.
Summary
- Canada will only retaliate if the U.S. lifts all its tariffs.
- U.S. tariffs include 25% on most Canadian goods and 10% on energy products.
- Canada will implement retaliatory tariffs worth CAD 155 billion in two phases.
- Trump views these actions as part of the war on drugs, but Trudeau sees them as hostile actions against Canada’s economy.
- Diplomatic relations between the two countries are severely strained, and the future of their economic cooperation is uncertain.
Source: Bloomberg
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