No tariffs yet, but that doesn’t mean no tariffs at all.
As Donald Trump was sworn in as the 47th President of the United States, it appeared that he decided against immediately imposing 25% tariffs on Canada and Mexico on Day 1. At a signing ceremony in the White House late in the day, though, Trump said tariffs would be coming shortly.
“We’re thinking in terms of 25% on Mexico and Canada,” Trump said in response to a question from a reporter. “I think we’ll do it Feb. 1.”
The tariffs on all Canadian exports to the United States had been expected to be part of the initial package of executive orders Trump would sign. In a story line first reported by the Wall Street Journal, Trump decided to hold off to review trade practices with Canada, Mexico and China, but it seems that review won’t take long.
Earlier in the day, Trump made clear that using tariffs, essentially a tax on anything imported into the United States, would be a major part of his agenda over the next four year.
“I will immediately begin the overhaul of our trade system to protect American workers and families. Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Trump said.
“For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources.”
That’s not a president who sounds like he has heard the message from Canadian officials of all stripes that imposing tariffs would hurt the U.S. economy and American consumers.
Those comments were not the only statements from Trump that should keep Canadian politicians up at night. In his speech, Trump also said that the U.S. would drill for oil and become rich thanks to the liquid gold beneath their feet. He also said that the U.S. would start making cars again at a rate not seen before.
Oil is Canada’s biggest export to the U.S. by far, automobiles are the second-biggest export. Even without tariffs, both of them are under threat from Trump.
Industry officials have confirmed that Trump’s threat of tariffs, which began on Nov. 25, has resulted in companies delaying investment decisions. Effectively, Trump is putting investment decisions on the Canadian industry on hold as executives need to figure out which side of the tariff wall their next plant or investment should be on.
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“Make no mistake, he’s coming for us. I think it’s a lot worse than it was yesterday,” Ontario Premier Doug Ford said Monday afternoon.
Ford is right. We may not know exactly what kind of tariffs Trump will bring in and how far-ranging they will be, but they are coming in some form.
The people around Trump are true believers in tariffs. They reject the orthodoxy of most economists that tariffs are bad for the U.S. economy, and instead believe that tariffs protect American workers and businesses.
We can beat our chests and say that we will take on the Americans and retaliate, and while that may make us feel good, it’s not realistic. We send 76% of our exports to the U.S. and they send about 17% of their exports to us. Put another way, our exports to the U.S. account for about 20% of our GDP and their exports to us account for less than 2% of theirs.
The impact is not the same.
The Trudeau government cancelled the Energy East and Northern Gateway pipelines, and they have refused to move forward with the many liquefied natural gas export proposals put before them. Those decisions, driven by Trudeau’s environmental zealotry, will now hurt our country in very concrete ways.
So, too, will the fact that despite our country having trade agreements with more than 50 different countries, more than three-quarters of our exports go to the United States. We need to adjust — and we need to adjust quickly — because Trump’s tariffs are going to hurt.