Canada Letter: Trump’s trade threat

The president-elect says he will impose a 25 percent tariff on everything Canada exports to the U.S.

View in browser|nytimes.com November 30, 2024 For Canada, Trade Tumult From Trump's Return Has Begun By Ian Austen The week began with President-elect Donald J. Trump threatening to impose a 25 percent tariff on everything that Canada exports to the United States. It ended with Prime Minister Justin Trudeau flying down to join him for dinner at Mar-a-Lago. Prime Minister Justin Trudeau leaving his hotel on Friday to meet President-elect Donald J. Trump. Jamie Kelter Davis for The New York Times [Read: Trump Plans Tariffs on Mexico, Canada and China That Could Cripple Trade] [Read: Trudeau Flies to Mar-a-Lago to See Trump Amid Tariff Concerns] Matina Stevis-Gridneff, our Toronto bureau chief, reports that the dinner was attended by top aides from both countries and lasted about three hours. But at its end, no one offered any insight into what it may have achieved. During his first presidency, Mr. Trump did slap tariffs on exports of aluminum and steel from Canada, Mexico and the European Union on ostensible national security grounds. Mr. Trudeau's government eventually negotiated those duties away, although not without a brief period during which Mr. Trump reimposed the aluminum levy. This week, as is often the case with Mr. Trump, skepticism emerged about whether he would follow through with his plan to introduce the tariffs, along with 10 percent duties on China, during his first day in office, Jan. 20. But even if the tariff threat proves to be just a negotiating tactic or bluster, my colleague Ana Swanson, who has reported from Washington on trade for over a decade, writes that "it is also a gambit that has immediate real-world consequences." [Read: Tariff Threats Show Trump's Commitment to Upending Global Trade] "The threats offered a preview of what could be another four years of trade tumult, mirroring Mr. Trump's first term when he scrambled the country's economic and diplomatic relationships," Ana writes. "The president-elect has long viewed tariffs as a powerful source of leverage that, when coupled with his unpredictable style, encourages other countries to swiftly make concessions." A marker between Quebec and Vermont along what was once called the world's longest undefended border. Ian Austen/The New York Times That leverage could be particularly powerful against Canada, whose economy not only relies heavily on exports but also became heavily integrated with that of its neighbor after the Canada-U.S. Free Trade Agreement of 1989. But the two biggest sources of Canadian exports to the U.S. come from industries for which the border disappeared long before the government of Brian Mulroney and the Reagan administration signed that pact. As a national security measure during the Cold War, the United States encouraged the development of Alberta's oil and gas industry and became Canada's biggest customer, far outstripping its domestic market. Today, about 60 percent of U.S. oil imports flow through pipelines from Canada. And in 1965, Lester B. Pearson, the prime minister at the time, and then-President Lydon B. Johnson amalgamated the previously inefficient Canadian car industry with its U.S. counterpart through a managed trade agreement. Given that there is no unwinding the continental links in the auto industry or in oil and gas, what will the consequences be for them if the tariffs are put in place? Jack Ewing and Neal E. Boudette, who cover the auto industry for The New York Times, spoke with a consultant who described it as "a two-alarm fire for the auto industry." [Read: Trump's Tariffs Would Deal a Big Blow to the Auto Industry] It would be a blow to an industry struggling with the transition to electric vehicles and facing the fact that China is now the world's largest auto exporter. [Read: How China Became the World's Largest Car Exporter] Chrysler Pacifica minivans are made exclusively in Windsor, Ontario. Rebecca Cook/Reuters For oil, the situation is more complex. Because of fracking, the United States is again the world's largest oil producer. But many U.S. refineries, particularly in the Midwest, are set up to process heavy Alberta crude rather than the very light oil that comes from fracking. So the United States exports much of that production and keeps importing from Canada. In a paper for the Canadian Global Affairs Institute in Calgary, Rory Johnston and Joe Calnan, who are energy analysts, looked at the effects of possible tariffs on Canada's oil exports. (It was published before Mr. Trump's election win.) Canadian exporters, they note, are in a bad bargaining position because Canada has no other significant export markets. So the analysts estimate that if tariffs are put in place, the pain will come in three forms: higher gas prices for American motorists, lower profit margins for U.S. refineries and lower prices for heavy Canadian crude oil relative to those for lighter grades of oil. Mr. Trump's announcement prompted contrasting reactions from the Canadian and Mexican governments this week. President Claudia Sheinbaum, Mexico's new leader, swiftly offered tough talk and raised the prospect of trade retaliation. Mr. Trudeau, in contrast, called for calm and expressed confidence that something could be worked out with Mr. Trump. By the end of the week, Canadian officials were suggesting that their country would announce a series of measures to strengthen the border. [Read: A Vulnerable Trudeau Hopes to Muster Unity Against Trump Tariff Plans] Matina and Simon Romero, who reports from Mexico City, write that Mr. Trump's threat might have turned the two countries against each other. It also seems to have revived the idea that Canada should go back in time and revive the Canada-U.S. Free Trade Agreement, an approach championed by Doug Ford, Ontario's premier. Mr. Trudeau and his officials, however, continued to downplay that idea. [Read: Trump's Tariff Threat Pits Canada Against Mexico] Ultimately, avoiding tariffs may have little to do with dinners in Florida or actions by Canada or Mexico. During the campaign, Mr. Trump promised that companies would absorb the costs of tariffs. But Ana writes that many studies show that they would actually pass it on to consumers, driving prices up. She cites a study that estimates that the current tariff plan, if carried out, would cost a typical American household about $2,600 a year. Stephen Tapp, the chief economist at the Canadian Chamber of Commerce, estimated that the Canada tariffs alone would raise costs for American households by about $2,000. The effect would be pronounced, he said, because about 79 percent of what Canada exports to the United States are materials or products that U.S. companies use to make other goods — or machinery used in that production. Given that potential toll on Americans, Mr. Tapp said, he believes that Mr. Trump's tariffs are "more of an opening gambit" than a likely reality. Trans Canada Canada's competition watchdog has accused Google of using its tools for online advertising to create a marketplace monopoly. Virginia Mayo/Associated Press The Bureau of Competition Policy has asked the Competition Tribunal to fine Google and force it to sell two of its services that drive online advertising, the tech giant's core business. It argues that the company has created an illegal monopoly. After 50 days in the mountains of British Columbia's Redfern-Keily Provincial Park and long after rescuers had abandoned their search efforts, Sam Benastick, a hiker, was found alive. Canada's major media companies and the CBC are suing OpenAI, the maker of the artificial intelligence chatbot ChatGPT. They accuse the company of violating their copyrights by using their journalism without permission to train and develop its artificial intelligence system, Matina reports. Ian Austen reports on Canada for The Times and is based in Ottawa. Originally from Windsor, Ontario, he covers politics, culture and the people of Canada and has reported on the country for two decades. He can be reached at austen@nytimes.com. More about Ian Austen How are we doing? We're eager to have your thoughts about this newsletter and events in Canada in general. Please send them to nytcanada@nytimes.com. Like this email? Forward it to your friends, and let them know they can sign up here. Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for Canada Letter from The New York Times. To stop receiving Canada Letter, unsubscribe. To opt out of other promotional emails from The Times, including those regarding The Athletic, manage your email settings. To opt out of updates and offers sent from The Athletic, submit a request. 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