- Canada’s 25% tariffs on U.S. vehicles and goods retaliate against new American trade policies.
- The dispute stems from Trump’s claims about drug trafficking, which Canada strongly disputes.
- Cross-border businesses risk supply chain disruptions and rising costs from the new tariffs.
Last week, President Donald Trump imposed 25% tariffs on goods coming from Mexico and Canada into the U.S., igniting new trade tensions. Now, Canada is firing back with its own 25% tariffs on a range of American imports. Some of these tariffs take effect tomorrow, February 4, while others, including those on all passenger vehicles (both gas-powered and electric), will roll out in about three weeks unless a last-minute deal changes course.
Trump actually signed the current U.S.-Mexico-Canada trade agreement (USMCA) during his first term. Now, he claims these new tariffs are a result of the bordering nations’ lack of action against drug trafficking into the USA. According to Canada, though, “Less than 1 per cent of the fentanyl and illegal crossings into the United States come from Canada.”
Read: China, Canada And Mexico Get Hit By Trump Tariffs, Sparking New Trade War
As a result of Trump’s moves, the Canadian government is retaliating. It released the following statement on Sunday:
“Canada will not stand by as the United States imposes unjustified and unreasonable tariffs on Canadian goods. In response, we are moving forward with 25 per cent tariffs on $155 billion worth of imported U.S. products. We will protect Canadian interests and support our workers and industries.”
Some of that protection from Canada is coming in the form of a tariff on production vehicles starting on February 18. It’s important to point out that importers, not exporters, pay tariffs. So in this case, Canadian companies desiring to import American-made products covered under the new tariff will pay 25 percent more for them. In many cases, the entity that paid the tariff then passes on the cost of that tariff to the consumer.
The impact this could have on automakers themselves is gigantic. Many of them move parts across the border before the car itself rolls off of the production line. In a sense, cars made in that way could face tariffs multiple times. It will almost certainly slow EV adoption in Canada as prices will likely increase a great deal across the auto industry.
Again, the first set of tariffs goes into effect on Feb 4 and it includes items like juice, whiskey, apparel, and motorcycles. The second set goes into effect on Feb 18 and includes cars, steel, aerospace products, and more.