FOCUS | CANADA
So, what about the challenges? The answer lies in seismic shifts in the political spectrum, both at home and to the south.
The Trump and Trudeau show During the US election campaign, Trump promised that he would impose 25% US tariffs on all Canadian imports on ‘day one’ of his presidency. The move may not have come on the first day, but the announcement from the White House did not take long. On 1 February, in a release subtitled
‘Addressing and Emergency Situation’, the new administration stated that “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA)”. The first measure to be taken in response to this
emergency was the imposition of 25% additional tariff on imports from Canada and Mexico, and a 10% additional tariff on imports from China, with the caveat that energy resources from Canada will have a lower 10% tariff. The rationale behind this unprecedented action is, in Trump’s words, “to hold Mexico, Canada and China accountable to their promises
of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country”. The US currently imports around six million
tonnes of steel products from Canada, along with three million tonnes of aluminium products, which is more than it sources from any of its other trading partners. While the broader US perspective is to safeguard jobs and industries, for most Americans there is likely to be a sharp climb in the costs of certain products. The retaliation from Canadian Prime Minister
Trudeau was swift. He promised a “firm and clear” response to the import tax, deeming the tariffs “unjustified”. While still positioning Canada as the closest ally of the US, there was no hint that Trump would be allowed to make such a move without some firm gesture in reply. Trudeau laid out “far-reaching” tariffs of 25% on US imports worth around C$155bn annually, with the target ranging widely from alcoholic drinks to household appliances. As it stands, Trump has stated that his tariffs will come into effect from mid-March, so there is a window for negotiation, though there is nothing to suggest that the move is simply posturing or that much is on the table to be negotiated.
Nevertheless, several metal-exporting countries are attempting to strike a deal on steel and aluminium imports. From the Canadian perspective, exports of
metal are seen as being of high value to key US industries – including those of high importance to the overhead crane industry, such as defence, shipbuilding and auto. At the time, current Minister of Innovation, Science and Industry François- Philippe Champagne noted that those exports make industry for the whole of North America more competitive and more secure. Nevertheless, there is no doubt that the impact of tariffs would be disruptive to both the Canadian and US economies. Price levels for certain goods would immediately jump, trade flows would be radically different and there would be a sizable ripple effect on spending, exchange rates, GDP, inflation, government revenue, employment and more. Some 66% of Canadians live within 100km of the US border, and almost two million – almost 9% of the workforce – work in industries in which more than one-third of jobs depend on demand from the US for Canadian exports. According to the BoC’s analysis, the pass-
through of tariffs to prices for final goods would be low at first but slowly increase over time.
Toronto skyline, Ontario, Canada.
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