Trudeau vows retaliation as provinces ban US alcohol and economists warn of severe financial fallout
US President Donald Trump has ordered significant tariffs on imports from Canada, Mexico, and China, citing fentanyl and illegal immigration as primary concerns, according to Reuters.
The new tariffs, implemented through three executive orders, include a 25 percent tariff on Canadian and Mexican imports and a 10 percent tariff on Chinese goods, set to take effect on Tuesday.
Trump declared that these measures would remain in place until what he calls a “national emergency” over fentanyl and illegal immigration is resolved.
According to BNN Bloomberg, Trump dismissed the possibility of negotiations to prevent the tariffs. When asked if there was anything Canada, Mexico, or China could do to stop them, he replied, “No, nothing. Not right now. No.”
During his press conference in the Oval Office, Trump further justified the tariffs by claiming a US$200bn US trade deficit with Canada.
He questioned why the US should be “subsidizing” its northern neighbour, despite TD Economics estimating the actual deficit to be closer to US$45bn in 2024. TD’s report noted that Trump’s figure is four to five times the officially reported statistics.
Trump’s plan also includes tariffs on Canadian oil and gas, which he stated would be reduced to 10 percent, down from the initially proposed 25 percent.
The US Energy Information Agency reported that as of October 2024, Canada exported a record 4.3 million barrels of oil per day to the US, making it the country’s primary destination for Canadian crude.
Alberta Premier Danielle Smith has been advocating for an exemption for oil and gas, but her press secretary Sam Blackett emphasized that Alberta maintains its opposition to tariffs on Canadian goods.
She said, “The Premier has been clear from the start that any tariffs imposed by the US on Canadian goods will hurt American and Canadian consumers, workers and businesses. That view has not changed.”
Following Trump’s announcement, Canada and Mexico immediately announced retaliatory tariffs, according to Business Insider.
Trudeau revealed that Canada will impose 25 percent tariffs on US$155bn worth of US goods, starting with US$30bn in tariffs on Tuesday, with the remaining US$125bn set to take effect in three weeks. Targeted products include beer, wine, lumber, appliances, and military gear.
Trudeau warned that these tariffs could drive up costs for US consumers, stating that they would affect grocery and gasoline prices, auto assembly plants, and essential goods such as nickel, potash, uranium, steel, and aluminum.
Speaking from Toronto, he said, “I won’t sugar-coat it. Our nation could be facing difficult times in the coming days and weeks.”
Trudeau also criticized Trump’s approach, saying, “Canada won’t relent until tariffs are removed,” and stated that the country was ready with a “purposeful, forceful but reasonable, immediate response.”
Mexican President Claudia Sheinbaum also confirmed Mexico’s retaliation. She announced that Mexico is implementing Plan B, which includes “tariff and non-tariff measures in defense of Mexico’s interests.”
Meanwhile, China’s Commerce Ministry criticized Trump’s actions, saying they “seriously violate WTO rules” and confirmed it will file a legal challenge with the World Trade Organization (WTO) while implementing its own countermeasures.
Some Canadian provinces have taken additional retaliatory steps.
The New York Times reported that British Columbia is banning US alcohol imports from Republican-led states, while Ontario and Nova Scotia are removing all American alcohol from their state-run liquor stores.
The Daily Beast estimated the value of American alcohol sales in British Columbia alone at nearly US$1bn annually.
British Columbia Premier David Eby condemned Trump’s tariffs, calling them “a complete betrayal of the historic bond between our countries” and “a declaration of economic war against a trusted ally.”
Canadian MP Charlie Angus supported the provincial bans, saying, “From here on in I will only drink ‘freedom’ wines from Canada, France, or Spain.”
According to Business Insider, Trump escalated his rhetoric further by stating that Canada “would struggle to exist” without US financial support.
He wrote on Truth Social, “We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don't need anything they have.”
In Washington, the US National Foreign Trade Council cautioned that Trump’s tariffs could increase the cost of consumer goods ranging from “avocados to automobiles.”
The group urged the three countries to find a diplomatic solution, arguing that their trade relations should provide them with “a competitive advantage.”
Trump’s tariff move comes despite warnings from economists about the potential economic fallout.
According to The Globe and Mail, a Canadian Chamber of Commerce analysis found that a 25 percent tariff could shrink Canada’s GDP by 2.6 percent, costing Canadian households $1,900 annually.
In the US, GDP could decline by 1.6 percent, with an estimated $1,300 impact on American households.
According to CTV News, the Canadian federal government is considering a pandemic-sized stimulus package to mitigate the economic damage.
However, public policy experts warn against excessive government intervention, with Matthew Holmes of the Canadian Chamber of Commerce stating, “If there’s a lesson from the pandemic, it’s that government money flooding into the economy also is a double-edged sword for inflation and other supply chain issues.”
Legal experts told The Globe and Mail that Trump’s use of the International Emergency Economic Powers Act (IEEPA) to justify tariffs could face legal challenges in US courts.
Stanford Law School’s Michael McConnell noted that Congress has granted the president broad discretion under IEEPA, making it difficult to overturn the tariffs.
However, Duke University’s Timothy Meyer argued that a “major questions doctrine” could apply, requiring Congress to have explicitly authorized such actions.
While China plans to challenge the tariffs at the WTO, trade experts believe Canada would win a WTO case easily, but WTO rulings currently hold little weight in the US due to a lack of an appellate body, a problem exacerbated by Trump and Biden’s refusal to appoint judges to it.
The new US tariffs are scheduled to take effect at 12:01 am EST on Tuesday, but goods already in transit before that deadline will be exempt, according to Reuters.
According to The Globe and Mail, the Canadian dollar and Mexican peso fell sharply following Trump’s announcement, while US stocks declined and Treasury bond yields rose.
Meanwhile, in a symbolic gesture of Canadian frustration, Ottawa Senators fans booed the US national anthem before their NHL game against the Minnesota Wild on Friday. The Senators won 6-0.
As tensions escalate, Trudeau reaffirmed Canada’s commitment to fighting the tariffs. “We’re in a critical moment,” he said, warning that economic “disruptions and hardships” will follow if a resolution is not found.
