With 11 hours left in trade negotiations with the United States, Canada is scrambling to avoid high tariffs on billions of dollars of exports.
If no last-minute deal is reached, U.S. President Donald Trump’s administration plans to impose 50% tariffs on a wide range of Canadian exports starting Wednesday, including electronics, industrial machinery, furniture, dairy products and wine.
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According to the Center for Strategic and International Studies, about $20.2 billion worth of goods went into the country, accounting for about 5% of U.S. imports from Canada.
President Trump has justified the tariffs as a response to Ottawa’s discriminatory treatment of U.S. cars, dairy products and alcoholic beverages.
President Trump has taken a number of punitive trade actions against Canada since returning to the White House, but the latest tariffs are notable because they are based on the first invocation of Section 338 of the Tariff Act of 1930 and apply to goods eligible for duty-free treatment under the United States-Mexico-Canada Agreement.
Despite President Trump’s tariffs on sectors such as autos and steel, an estimated 85% of U.S.-Canada trade remains tariff-free due to exemptions from the tripartite agreement ratified during the first Trump administration.
“If implemented, these latest tariffs will hurt small businesses and the self-employed across the country, from flower bulb growers and beekeepers to hockey equipment manufacturers, the cement industry, dairy products and wine,” said Julien Karaghesian, a lecturer and trade expert at McGill University in Montreal.
“A 50% tariff would effectively remove the price of hundreds of Canadian products from the U.S. market.”
Talks between Canadian and U.S. officials about a potential trade deal are taking place behind closed doors, but it is no secret that negotiations have stalled.
Canadian Prime Minister Mark Carney said Monday he plans to meet with President Trump before Wednesday’s deadline, calling the negotiations “delicate” and “intense.”
Earlier this month, Carney went so far as to admit that the meeting had been “terrible.”
Ottawa’s efforts to achieve a breakthrough are complicated by the need to bring each of the country’s provinces into the deal.
Among the trade policies that have drawn President Trump’s ire is a ban on the sale of American alcoholic beverages at the state level.
Ten Canadian provinces, excluding Alberta and Saskatchewan, have each blocked alcohol sales in the United States since early last year in retaliation for President Trump’s trade spree.
Ontario Premier Doug Ford and some other provincial leaders have indicated they are open to lifting restrictions if President Trump lifts tariffs, but other provincial leaders are less enthusiastic.
Meanwhile, Quebec Premier Christine Fréchette said Canada’s supply management system, which sets production and import quotas for dairy, eggs and poultry, is a “non-negotiable” issue for the province.
There is no question that Canada has far more to lose than the United States in this negotiation.
About 70 per cent of Canada’s exports go to the United States, and its economy is about 13 times the size of its northern neighbor.
In contrast, the United States sends 30% of its exports to Canada.
“Many people see the conflict as being based on feelings of unfairness and disrespect,” said Ian Lee, a trade expert and associate professor at Carleton University in Ottawa.
Canada would suffer further from an asymmetric trade war, but many Canadians don’t want the government to concede to Trump, Lee said.
“Canadians are unwilling to make any compromises from the Carney government in return for understanding the bigger ‘prize’: access to the world’s largest economy.”
Even if Mr. Carney is able to reach a deal and avoid a flare-up in the U.S.-Canada trade war, Canadians may not be willing to support American brands for some time to come.
In a poll conducted last month by Nanos Research, 69 per cent of Canadians said they were unlikely to buy American-made alcoholic beverages even if they returned to shelves.
The ill will that President Trump’s policies have fostered among Canadians is so deep that the reputational damage extends far beyond the president himself.
In a poll released earlier this month by the Angus Reid Institute, 48 per cent of Canadians said they had an unfavorable impression of Americans in general, compared to 45 per cent who said they had a positive impression.
Carney did not say how he would respond to President Trump’s tariffs if negotiations break down, but said on Monday that Canada was negotiating from a “position of strength.”
“We have plans for every possible situation,” Carney told reporters.
Regardless of what happens Wednesday, Ottawa will likely continue its efforts to reduce its dependence on its neighbors over the long term.
In September, Carney announced plans for a new trade diversification strategy focused on untapped markets such as Asia in response to what he called a “disconnect” in the global economy.
“Ottawa has already started trying to diversify Canada’s trade relationships, which should help in the long run,” said Sybal Ray, a supply chain management expert and professor at McGill University.
“In terms of measures that could actually put pressure on the United States, curbing energy exports is probably one of the strongest options available. But I don’t know if Ottawa is willing to go that far, also considering the economic impact on Canada.”
