On Monday, President Donald Trump threatened to rekindle a trade dispute with one of the United States’ closest allies and most important economic partners by announcing broad tariffs against Canada. The 50% tariffs imposed on specific Canadian goods, such as electrical equipment and machinery, represent some of the highest tariffs enacted by his administration against any nation. Despite the president’s recent threats of tariffs against the neighbouring country in response to wildfire smoke affecting the northern United States, administration officials have clarified that the latest tariffs are not connected to this issue. The levies will be implemented in 30 days, encompassing approximately $20 billion worth of Canadian goods, according to the White House. Canadian Prime Minister Mark Carney stated that the country “believes in the benefits of free and fair trade,” in a statement on Monday. “In all circumstances, Canada will work relentlessly and take any measures necessary to build our strength at home and to support Canadian workers, farmers, businesses, and families,” Carney said. However, Ontario Premier Doug Ford took a more assertive stance, promptly urging Canada to respond in kind. “If these tariffs proceed, Canada should respond tariff for tariff, dollar for dollar,” Ford said in a post on X.
Trump referenced Section 338 of the Tariff Act of 1930, which permits a president to impose tariffs of up to 50% in response to discrimination against American goods by another country. However, the law has not been applied in this manner historically. Several key Canadian imports, including energy products, critical minerals, fish, and other goods subject to industry-specific duties, such as cars and metals, have been excluded from the latest round of tariffs. However, unlike other levies Trump has enacted against Canada, there will be no exemptions for goods covered by the trade pact known as the United-States-Mexico-Canada Agreement, which is currently under negotiation. Research firm indicates that merely 5% of Canadian imports would be impacted by the new tariffs, translating to approximately 0.6% of total US imports.
Nonetheless, should the courts affirm Trump’s application of Section 338, it may serve as a valuable instrument in forthcoming trade negotiations, remarked Stephen Brown. “Taking a step back, it’s striking that the Trump administration is now reaching to a new method to implement tariffs,” Brown wrote in a research note Monday. Tariffs have emerged as a prominent economic negotiation strategy for Trump, who has sought to impose them on every significant US trade partner throughout his recent term. However, the Supreme Court ruled in February that the president could not utilise the International Emergency Economic Powers Act, or IEEPA, to impose extensive tariffs on a global scale. The decision nullified Trump’s effort to impose taxes on imports from all nations, as well as the extra punitive tariffs on China, Canada, and Mexico.
Instead, Trump imposed temporary, across-the-board 10% tariffs under Section 122 of the Trade Act of 1974, which are scheduled to expire later this week. Last week, the US declared a new 25% tariff on numerous Brazilian imports under Section 301, subsequent to a yearlong investigation into Brazil’s trade policies, which it deemed unfair. The US has previously indicated the possibility of imposing additional tariffs on China, its main economic competitor in global trade, which is already subject to significantly higher tariffs compared to other countries. Although tariffs were not addressed during the summit between Trump and Chinese leader Xi Jinping in May, Xi is anticipated to visit the US in September. In its statement Monday, the White House underscored that Canada was one of two nations that opted to respond to US tariffs with retaliation instead of engaging in negotiations, the other being China.