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Days before tariffs that have the potential to cripple Canada’s economy are expected to come into effect, the country’s political leaders are still in the dark about what exactly U.S. President Donald Trump will do.
Since his re-election in November, Trump has repeatedly said he would hit Canada and others with tariffs up to 25 per cent. On his first day back in the Oval Office, Trump suggested tariffs on Canadian goods could be coming on Saturday.
The federal government is preparing retaliatory tariffs should Trump follow through with his threats. Sources have confirmed to CBC News the government is also preparing a multibillion-dollar aid package for Canadians and businesses in anticipation of potential U.S. tariffs
But multiple ministers said Wednesday that until Trump’s plans are clear, there is no point in speculating on exactly how Canada will respond.
Natural Resources Minister Jonathan Wilkinson said any aid package that the government might implement would depend on what industries are impacted by the potential tariffs.
“We have to just wait a little bit. We don’t have tariffs right now and moving to try and put in place programming to support those that are most impacted wouldn’t make much sense until we know who those folks are,” he said during a news conference.
“Our primary argument with the United States right now is that we shouldn’t have tariffs in the first place and we haven’t given up on that.”
Energy and Natural Resources Minister Jonathan Wilkinson says the government is trying to show the U.S. administration there are alternatives to imposing tariffs that will get them ‘something of value that is consistent with some of the things they campaigned on.’
During a separate news conference, Labour Minister Steve MacKinnon said all options are on the table when it comes to retaliatory tariffs.
“We will respond in kind. Needless to say we will respond with tariffs of our own and beyond that — depending on the scale of these measures,” he said.
Wilkinson said even figuring out Trump’s tariff endgame “is not a simple thing.”
The president’s messaging around why the proposed tariffs are necessary have been mixed. Trump has said in some instances that he’s worried about drugs and migrants entering the U.S. from Canada, and at other times he’s cited a trade deficit as his irritant.
There have been suggestions that Trump wants tariffs in order to raise federal revenues and he has also complained about Canada lagging on defence spending.
“I was in Washington a few weeks ago, I met with many senior Republican folks … and when you talk to all of those folks, the general answer you get is, ‘We really don’t understand why they’re targeting Canada,” Wilkinson said Wednesday.
“When you ask them what you think he’s going to do, they all say ‘We have no idea.'”
Commerce secretary nominee Howard Lutnick was asked about the potential impacts of tariffs at a hearing on Wednesday. Lutnick, who appeared to suggest tariffs could come in phases, pointed to border issues with Canada and Mexico as a ‘short term’ issue. Lutnick cited both fentanyl and undocumented migrants as areas of concern for the Trump administration but did not provide details about his assertions beyond calling for an end of movement of fentanyl into the U.S.
Howard Lutnick, who Trump has tapped to be his commerce secretary, offered some insight into what the president’s plan might be.
During a confirmation hearing on Wednesday, Lutnick said there’s a two-stage tariff plan in which Canada and Mexico could get hit with initial trade penalties within days then face broader penalties this spring.
“This is a separate tariff to create action from Mexico and action from Canada [on the border] and as far as I know they are acting swiftly and if they execute it, there will be no tariff,” he said, before adding that other tariffs focused on trade issues are still being looked at.
One of Trump’s first presidential orders called on a number of U.S. departments to — among other things — investigate the causes of the U.S.’s “large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits.”
White House says Trump plans to follow through on Canada, Mexico tariffs on Saturday
The order also called for an investigation of “the unlawful migration and fentanyl flows from Canada, Mexico [and China].” Both studies are expected to be completed by April.
Ottawa has shown a willingness to engage with Trump on the border issue, announcing a $1.3-billion border package that will result in more personnel and technology to better police the 49th parallel.
Canada also has the data on its side. Figures from U.S. Customs and Border Protection show the agency seized just 19.5 kilograms of fentanyl at the northern border last year compared to a whopping 9,570 kilograms at the southwestern one.
The U.S. government’s own data suggests the trade in goods deficit with Canada was $55 billion US as of November 2024. But the Canadian government has pointed out that data excludes trade in services, such as the entertainment industry. Officials have also said that when you exclude oil exports, which are driven by U.S. demand, the Americans actually have a trade surplus.
Defence Minister Bill Blair said last week that Canada is also planning to push its plan to hit the 2 per cent NATO spending target date up to 2027 as opposed to 2032.
Bank of Canada cautions it can do little to offset tariffs
The Bank of Canada cut its key interest rate by 25 basis points to three per cent on Wednesday, while cautioning that Trump’s tariff threats are contributing to uncertainty around future rate decisions.
Bank Governor Tiff Macklem told reporters in Ottawa that the central bank is analyzing various scenarios given the tariff threats. But he said there are limits to what the central bank can do should Trump follow through on his promise.
“Monetary policy cannot offset the economic consequences of a protracted trade conflict. The reality is the economy is going to work less efficiently, Canada is going to produce less, it’s going to earn less,” he said.
“Monetary policy can’t change that, it cannot offset it. What it can do is help the economy adjust to that and try to be a source of stability through that adjustment.”
Bank of Canada governor Tiff Macklem says a protracted trade conflict with the U.S. would be a ‘complex shock’ for monetary policy, as the country would face both weaker growth and higher inflation.
How the bank reacts to tariffs depends on the impact, Macklem said. Tariffs could have a twofold effect by putting downward pressure on inflation via slower growth, but also upward pressure on inflation due to higher prices, he said.
“We’re going to be assessing the relative weight of those two [factors],” Macklem said.
For now, Macklem said his focus is on ensuring the economy is on stable enough footing to respond to tariffs should they be imposed.
Source: cbc
