US-Canada trade war looms as President-elect Donald Trump prepares for his inauguration with no signs of backing out of proposed tariffs
Canadians may impose a "Trump tariffs tax" on the United States if US President-elect Donald Trump follows through on his plan to impose 25 per cent tariffs on Canadian imports, Canadian Foreign Minister Melanie Joly warned on Friday. Joly pledged a robust response from Canada in the event of a trade war.
Tensions rise ahead of Trump's inauguration
The warning came after Joly's visit to Washington, where she met with US government leaders to discuss critical issues, including trade and border security. Trump's proposed tariffs, which also target other major trade partners like Mexico and China, have set the stage for what could be the most significant trade conflict between Canada and the US in decades.
"This would be the biggest trade war between Canada and the US in decades," Joly said during a press conference. She emphasised Canada's readiness to respond with "maximum pressure" and detailed plans for retaliatory measures, which could include increased duties on US products like steel, ceramics, glassware, and orange juice.
Canada prepares for retaliation
Citing a Canadian government source, a report by European news agency AFP stated that Ottawa is prepared to enact higher duties on various US goods as part of a phased response if Trump's tariff plans are implemented. Outgoing Prime Minister Justin Trudeau further reiterated Canada's commitment to defending its economic interests, warning that the proposed tariffs would jeopardies American jobs, raise consumer prices, and disrupt the integrated North American supply chain.
US-Canada trade
The stakes are high for both countries, with trade between Canada and the US reaching a record $1.3 trillion in 2023, according to Canadian government data. Around 70 per cent of US imports from Canada are essential components of American supply chains. The trade partnership supports substantial employment on both sides of the border. In Canada, over 2.4 million jobs rely on exports to the United States. Meanwhile, Canadian companies employed more than 850,000 American workers in 2023 and nearly eight million US jobs are connected to trade with Canada. In New York State and New Jersey alone, 1,138 Canadian-owned companies provide employment to almost 100,000 workers.
Potential economic fallout
Scotiabank's analysis suggests that a trade war could cause a significant economic downturn for Canada, with GDP potentially falling by over 5 per cent, rising unemployment, and inflationary pressures. Both nations risk substantial economic disruptions if the trade tensions escalate. As Trump prepares to return to the White House on January 20, the looming trade conflict highlights the fragility of the longstanding Canada-US economic partnership and the potential for widespread economic repercussions.
SOURCES - BUSINESS STANDARD
