Trump’s 50% tariffs on Canada would include goods previously protected by the USMCA trade pact
President Donald Trump on Monday imposed 50% tariffs on most Canadian goods, declaring that Canada has unfairly discriminated against American autos, alcohol and dairy products.The move could unleash a new wave of economic chaos, with risks of higher inflation and further fraying of relations between two nations that had been closely woven together before Trump’s return to the White House. The administration official previewing the action said that Canada was one of the only nations other than China that retaliated against Trump’s previous tariffs and must be held accountable.The official insisted on anonymity on a call with reporters to preview the president’s actions and said that Trump signed three proclamations to launch the tariffs under Section 338 of the 1930 Trade Act. Several Democratic lawmakers last year proposed repealing the section because they said Trump could use it to destabilize the economy.The new 50% tariffs would exclude energy products, potash, fish and critical minerals, but they would include goods that had previously been protected from import taxes by the United States-Mexico-Canada Agreement, or USMCA. That 2020 trade pact was not renewed by the U.S., triggering a new set of negotiations that could run until 2036.The White House said in a fact sheet that the tariffs would go into effect in 30 days, meaning there is time for negotiations as Trump has not always followed through on his announced tax hikes on imports.Canadian Prime Minister Mark Carney said in a statement that his government believes in the “benefits of free and fair trade,” having signed “more than 20 new economic and security partnerships.” He said Canada is prepared to negotiate with the Trump administration.“This trade dispute has raised costs for families, particularly in the U.S.,” Carney said. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens.”
Canada faces the risk of a broader trade war
Still, the tariffs could escalate into a wider trade war as Canada seeks to defend its economy. Ontario Premier Doug Ford saw a possible showdown ahead.“If these tariffs proceed, Canada should respond tariff for tariff, dollar for dollar,” Ford posted on social media.Candace Laing, CEO of the Canadian Chamber of Commerce, said the Trump administration’s moves were “regrettable” but the two countries need to use the 30-day window before the tariffs start “to make meaningful progress in advancing formal talks.”Chris Swonger, CEO of the Distilled Spirits Council of the United States, also called for a deal: “We encourage policymakers on both sides of the border to pursue a negotiated solution that restores market access for U.S. spirits and avoids further harm to the U.S. hospitality sector.”But the use of a Great Depression-era law to impose the tariffs broadens some of the risks, as those tariffs could be applied to other U.S. trading partners, not just Canada, and inject “massive uncertainty” into the global economy, said Scott Lincicome, vice president of general economics at the Cato Institute, a libertarian think tank.“We crossed the Rubicon,” Lincicome said. “The invocation of 338 is the nuclear option for Trump tariffs.”
Tariffs are also a political challenge for Trump
The new tariffs carry serious political and economic risks for Trump ahead of the November midterm elections for control of Congress. His “Liberation Day” tariffs last year in April provoked a financial market meltdown over concerns about inflation and a recession, prompting him to walk back the rates for a period of negotiation.The Supreme Court ruled this February that Trump had lacked the legal authority to impose the tariffs by declaring an economic emergency, causing the administration to find alternative ways to raise import taxes based on a series of legal authorities.Tariffs are taxes on imports, which companies can then pass along to consumers in the form of higher prices. The president maintains that the costs created by tariffs will cause manufacturing to relocate to the U.S., though there is little evidence of that in the economic data.“These new taxes will raise prices on American families and likely lead to retaliation against the very industries Trump purportedly wants to protect,” said Rep. Suzan DelBene, D-Wash., who is chair of the Democratic Congressional Campaign Committee.The latest import taxes could worsen Trump’s weak ratings on the economy. He promised voters when running for the presidency that he would bring prices down, but the annual inflation rate has risen since he became president because the tariffs and the war in Iran are pushing up oil prices.
Trump has repeatedly targeted Canada on trade issues
The Trump administration official said the president had also requested that his aides look into additional tariffs on Canada because its wildfires hurt air quality in the U.S. He had publicly threatened to do so in social media posts.At the World Cup final on Sunday, Trump watched the game with Carney. The Trump administration official said their time together at the game was not a working visit to discuss trade and tariffs.Trump claims in the proclamations that Canada discriminates against American autos, alcohol and cheese relative to other nations, but his argument rests in large part on retaliatory actions taken by Canada after the U.S. president imposed tariffs on Canada under the pretext that it should do more to stop fentanyl smuggling.Trump noted in his autos proclamation that Canada maintained, starting in April 2025, a 25% tariff on the imports of U.S. motor vehicles that did not qualify for preferential treatment under the USMCA.The White House said that, regarding alcohol, all but two Canadian provinces and territories halted the purchase and retailing of American alcoholic beverages beginning last year, which was also a response to Trump’s tariffs and taunts of making Canada the 51st state.But Trump has long objected to Canada’s treatment of U.S. cheese, saying in his proclamation that Canada discriminates against the U.S. compared to Europe on dairy products.Trump and Carney have had a frosty relationship, with Carney, a former central banker, who pledged to go “elbows up” for Canada during his election campaign last year.At the World Economic Forum in Davos, Switzerland, in January, Carney called out Trump — without naming him — by saying that the “most powerful” countries are using the economy to coerce less powerful nations.Trump responded at the time by saying: “Canada lives because of the United States.”
Associated Press writer Jim Morris contributed from Vancouver, British Columbia.
—Josh Boak, Associated Press
1 month ago
