Steel, computers and sports equipment are a few of the US imports on which the Canadian government has imposed 25% tariffs.
Economists have been signaling the start of the trade war since US President Donald Trump took over the White House, but it actually began much before the election results were announced. The Republican candidate had built his entire campaign around his mission to quash rival economies and put the US at the top.
Countries, particularly China, had been anticipating such tariffs for months and were making the necessary arrangements to tackle this crisis when it became a reality. With Trump announcing tariffs on imports from Mexico and Canada, the leadership of both countries have tried repeatedly to negotiate a fairer trade deal. However, they were met with reluctance from the POTUS and are now forced to retaliate.
Canada announced that retaliatory tariffs worth nearly C$30 billion would be applicable on American imports after Washington announced tariffs on steel and aluminium imports. Steel, computers and sports equipment are a few of the US imports on which the Canadian government has imposed 25% tariffs. According to Canadian Finance Minister Dominic LeBlanc, the government plans to follow a ‘dollar-by-dollar’ approach and is following in the EU’s footsteps after it instated $28 billion worth of tariffs on imports such as motorcycles and whiskey from the US.
The Guardian reported that Mélanie Joly, Canadian Minister of Foreign Affairs, stated in a press conference that the country would not back down or be coerced, and chastised Trump for driving the global economy into a state of chaos. LeBlanc explained that the tariffs would include $12.6 billion on steel products, $3 billion on aluminium products and $14.2 billion worth on additional imported US goods.
Canada’s decision to react strongly against US protectionism comes after Trump announced duties on steel and aluminum imports, which will inevitably hurt The Great White North, which is the largest supplier of these products to Washington. Tariffs on steel and aluminum were increased after Toronto increased the prices of electricity exports to the US. But the White House announced that it would not follow through on implementing these additional duties once Canada agreed to back off from increasing electricity tariffs.
However, the damage is already done, and countries across the world are resorting to increasing tariffs in retaliation. As a chain reaction, after the EU increased tariffs, Canada and China have also followed suit. Canadian and EU leaders have expressed regret over this escalating trade war, saying it would harm domestic businesses, but believe this decision is necessary to show Trump that his actions of economic coercion are unjustifiable.
Ursula von der Leyen, President, European Commission said that these duties would not only hurt businesses and consumers but also adversely impact the global supply chain. Despite criticism from within the US and outside, Trump remains steadfast in his decisions to impose these trade taxes, arguing that markets will go up and down, but it is important to rebuild the country.
The President’s ‘America First’ strategy has certainly rattled the market, as analysts and investors alike are unable to make long-term predictions concerning these tariffs. Following a week of losses, the US market recorded marginal gains on Tuesday after inflation figures fared better than expected. Trump and his supporters are assured that despite initial losses, the future will be optimistic. Convinced his economic policies will create more jobs in the US, Trump has described the future to be ‘bullish.’
The Federal Reserve on the other hand, is more apprehensive about the forthcoming months, with the Fed chair, Jerome Powell announcing that given this heightened economic uncertainty, interest rates will remain unchanged following the meeting next week.
With economic experts and financial analysts all waiting to see how these consequences unfold, more countries are likely to resort to protectionist policies in a desperate bid to stand up to Trump. With Canada’s announcement of the first round of retaliatory tariffs, it remains to be seen how the global supply will be affected, and if anything can be done to salvage this situation.