US President Donald Trump’s 50 percent tariffs on certain Canadian goods, which took effect yesterday, delivered another blow to bilateral trade, renewing focus on Ottawa’s efforts to reduce dependence on its southern neighbor.
Canadian Prime Minister Mark Carney’s strategy involves a search for new markets, a focus on domestic trade and the launch of major projects.
The two economies are heavily inter-connected, with about 70 percent of all Canadian exports heading to the US.
Photo: Reuters
Previous Trump levies on autos, steel, aluminum and lumber have hit Canada hard, forcing job losses and stunting growth.
Canada has even entered a technical recession this year after two consecutive quarters of economic contraction.
The latest tariffs came into force after days of negotiations failed to produce an agreement.
They impact about US$20 billion worth of goods, or 5.5 percent of Canadian exports to the US, targeting products ranging from hockey sticks to cement.
Carney said Canada would match the US tariffs “dollar for dollar to protect our workers and businesses.”
The exports affected by the US tariffs include products that were previously protected under the North American trade pact, the US-Mexico-Canada Agreement (USMCA).
At first glance, “that’s frightening,” Laval University international economic law professor Richard Ouellet said.
“Until now, the USMCA acted as kind of a shield. The Americans are opening a breach,” he said.
Trump declined to renew the USMCA on July 1, making it subject to annual reviews.
While Trump ditching USMCA exemptions could forecast more extreme measures to come, Canada’s largest bank, RBC, predicted that the first package of 50 percent tariffs would not “significantly change broader Canadian growth.”
“That’s because the new tariffs, while significant, will still impact a small segment of total trade,” RBC said, adding that about 80 percent of Canadian goods would still enter the US tariff-free.
Since taking office in March last year, Carney has focused on diversifying economic partnerships to reduce Canada’s reliance on the US market.
“Canada has what the world wants,” Carney said in a statement following the breakdown of negotiations with Washington. “We will not allow any nation to determine our future.”
Carney has headed to China, India and Saudi Arabia, and made several stops in Europe seeking deals to expand Ottawa’s economic relationships overseas.
In January, he signed a preliminary agreement with China, providing for the import of electric vehicles to Canada.
Relations with Europe have also been bolstered. Canada last month selected the German firm TKMS to build its new fleet of submarines.
Canada’s central bank last month said the economy was “showing signs of improving,” adding that some businesses were adjusting to US protectionism, including by finding new customers abroad.
A report from the Canadian minister of international trade said that last year, the value of exports to non-US markets jumped by 11 percent, hitting 33 percent at one point — the highest level in more than four decades.
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