President Donald Trump withdrew his threat to put high tariffs on Canadian goods late on Tuesday, less than two hours before yet another midnight tariff deadline. The two nations struck a deal, Trump announced, with few details. “We’re going to give something, and we’re doing certain things,” he told. The last-minute shift highlights the manner in which the Trump administration has employed tariffs not merely as an economic instrument, but also as a means of exerting influence in discussions with both allies and adversaries. The dispute regarding tariffs transcends the mere taxation of $20 billion worth of Canadian imports. It concerns the potential for Trump to leverage the threat of tariffs to secure concessions from America’s nearest trading ally — encompassing, but not restricted to, the opening of markets to American agricultural producers and the provision of more advantageous conditions for US enterprises. In the lead-up to the announcement of a potential tariff, Trump indicated that he was contemplating imposing levies on the United States’ northern neighbour, citing concerns that it was not sufficiently addressing the issue of wildfire smoke contributing to air pollution in America. Trump asserts that he has leveraged the threat to reinstate the Keystone XL pipeline.
Following the Supreme Court’s decision to overturn Trump’s most extensive tariffs earlier this year, a multibillion-dollar refund process was initiated, providing businesses with relief from the relentless tariff fluctuations experienced in the preceding year. It even instilled confidence in many employers to expand their workforces, a strategy they had previously avoided to maintain liquidity for tariff payments. However, it did not take long for Trump to capture attention by threatening 50% tariffs on $20 billion worth of Canadian goods – this time utilising a trade law that had never been employed before, placing the country once again in the midst of Trump’s tariff agenda. Trump’s argument for tariffs is based on his conviction that the global free trade movement that has prevailed since the end of World War II is fundamentally misguided. “To me, the most beautiful word in the dictionary is tariff,” he stated during the campaign trail in 2024. Trump marketed tariffs to voters as a panacea: They would rejuvenate America’s manufacturing industry, compel foreign nations to comply, and generate substantial revenue, he asserted. While tariffs can theoretically achieve some of those objectives, they cannot fulfilll all three simultaneously. If tariffs serve as a potent tool in diplomatic conflicts, their efficacy in generating revenue or persuading business leaders to invest in reshoring diminishes rapidly. For instance, Trump’s stated rationale for enacting new tariffs on China last year was to curb the flow of fentanyl to the US. What began as a 10% minimum duty on Chinese goods has surged to exceed 100%.
China retaliated against the United States with equally severe tariffs. Trade between the two nations reached an impasse, thwarting the anticipated surge in tariff revenue that Trump had forecasted. Assessing the effectiveness of the tariffs in reducing fentanyl trafficking presents challenges; the Drug Enforcement Administration indicates that China continues to be a significant supplier of the precursor chemicals utilised by Mexican cartels in the production of the drug. Trump’s promised “golden age” of manufacturing also hasn’t materialised. The White House has enthusiastically claimed responsibility for the slight increase in manufacturing employment this year, with approximately 31,000 new jobs created since January. However, the economy has experienced a net loss of approximately 62,000 manufacturing jobs since the onset of Trump’s second term. It remains uncertain the extent to which tariffs have influenced the recent rebound. Like any economic policy, tariffs will not provide advantages to all stakeholders. They gained prominence in the 1800s as a mechanism of economic protection, providing emerging American businesses with additional time to compete against established manufacturers overseas. Today, numerous American businesses are reaping the rewards of Trump’s assertive trade strategies.
Among them: Cleveland-Cliffs, one of the largest American steel manufacturers, has been able to charge customers significantly higher prices compared to approximately a year ago, prior to Trump’s introduction of 50% duties. “This improving situation in both steel and automotive demand can be attributed to the long-overdue trade policies we now have in place in the United States,” CEO Lourenco Goncalves said on an earnings call last month. The tariffs, he added, have been “the single most effective industrial policy implemented in our country in a generation.” However, the additional funds that customers are allocating for American-produced metals could potentially be diverted from resources intended for employee bonuses, 401(k) contributions, or the hiring of additional staff. The tariffs represented an average tax increase of $1,000 per household in 2025, as reported by the non-partisan Tax Foundation. Currently, as part of the agreement Trump is finalising with Canadian Prime Minister Mark Carney, duties on Canadian steel, aluminium, and cars may be reduced. The typical American not engaged in those sectors is unlikely to experience any immediate impact – whether positive or negative. However, consumers will persist in paying a premium that businesses have incorporated into their pricing strategies, as the sole constant in the trade landscape remains uncertainty.
