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The Potential Effects of Canada Tariffs Imposed by Trump on Both Countries

No one could have predicted this kind of exit for Justin Trudeau. If President Trump enforces his plan to impose 25 percent tariffs on Canadian exports, the nation could be plunged into economic chaos as Trudeau concludes his term as prime minister.

Despite Canadian officials spending last week in Washington trying to counter the president’s tariffs, which will also affect Mexico, their efforts have yet to bear fruit. If enforced, Canada is set to retaliate, sparking a trade war.

Mr. Trump, in various statements, has justified the tariffs by claiming that the United States has been destabilized by large numbers of unauthorized immigrants and significant quantities of fentanyl crossing the border from Canada and Mexico. However, U.S. government statistics do not support these claims.

Mr. Trump has also alleged that Americans “subsidize Canada” by providing hundreds of billions of dollars annually — although he has not provided any evidence — and has urged companies to relocate their plants from Canada to the United States. He has also complained about Canada’s trade surplus with the United States, which is primarily driven by oil and gas exports and totaled $63 billion last year.

Regardless of the reason, there is widespread agreement in Canada that the tariffs would inflict significant harm on the country’s export-dependent economy, which is intricately linked with the American market.

Jean Simard, the president of the Aluminium Association of Canada, recalled the impact of a 10 percent U.S. tariff on Canadian aluminum exports during the first Trump administration.

“The 10 percent tariffs years ago were highly disruptive,” Mr. Simard said. “Twenty-five percent tariffs will be highly destructive.”

In the past year, only 19 kilograms of fentanyl were intercepted at the Canada-U.S. border, compared to nearly 9,600 kilograms at the border with Mexico, according to U.S. Customs and Border Protection. Moreover, The Globe and Mail reported that the Canadian figure was inflated by the inclusion of non-border-related seizures.

U.S. authorities apprehended approximately 24,000 individuals last year who crossed the border from Canada into the U.S. without authorization, in comparison to over two million people who were apprehended at the southern border.

However, Mr. Trudeau’s government acted swiftly to address Mr. Trump’s concerns regarding both issues by investing 1.3 billion Canadian dollars (about $900 million) in measures to strengthen border security.

These measures included the appointment of a “fentanyl czar,” providing the Royal Canadian Mounted Police with two Black Hawk helicopters to monitor the 5,525-mile-long border, assigning a significant number of officers to border patrols and the purchase of an array of electronic surveillance devices, including drones.

The increased border security efforts have resulted in the apprehension of a small number of individuals attempting to enter Canada from the United States.

Although Mr. Trump stated last week that he has observed improvements in migration at both borders, he added that he was unsatisfied with how Canada and Mexico addressed fentanyl smuggling.

While Mr. Trump maintains that Canadian exporters will bear the cost of the tariffs, the levies would need to be paid by American importers. It is uncertain whether they could recover the cost from Canadian firms.

Most economists agree that the result would be inflation and supply disruptions in the United States, while Canadian industries might face large-scale layoffs.

Mr. Simard stated that the tariff threat had already raised the cost of aluminum in North America significantly. If the tariffs are implemented, he estimates that the resulting aluminum price increases will add about $3,000 to the cost of producing a Ford F-150 pickup truck.

Automotive trade between the two countries is roughly equivalent, and many auto parts cross the border several times before ending up in an assembled vehicle.

Because 25 percent far exceeds the profit margins on cars and trucks, as well as the parts used to manufacture them, industry executives predict that parts manufacturers will soon halt shipments and factories will rapidly close in all three countries, causing thousands of job losses.

“A 25 percent tariff on the Mexican and Canadian border will create a hole in the U.S. industry that we have never seen,” said Jim Farley, chief executive of the Ford Motor Company, last month.

American farmers would also face increased prices for potash, a crucial fertilizer. About 80 percent of the potash in the United States originates from Canada due to limited U.S. reserves.

Source: https://www.nytimes.com/2025/03/03/world/canada/trump-canada-tariff-economy-impact.html

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Exploring the Potential Repercussions of Trump’s Canadian Tariffs on Both American and Canadian Economies”>

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