The trade war that former President Donald Trump wrested open with his tariffs on Canadian products rattled the economies of both and rejoined them in a sprawling political and economic skirmish. Canada’s response to these tariffs has included everything from retaliatory measures to warming global partnerships. In this article, we discuss how Canadians are fighting back against Trump’s tariffs, using data, government initiatives, and creative strategies that businesses have used to adapt and thrive.
America’s Tariffs: A Spark for Canadian Fortitude
In 2018, the Trump administration slapped tariffs on steel and aluminum imports from Canada, saying they were a national security threat. The tariffs — 25 percent on steel and 10 percent on aluminum — rattled Canadian industries, unleashing economic consequences that would echo for years. Although Trump insisted these tariffs were necessary to protect U.S. jobs, the decision immediately sparked tensions between the two neighboring countries.
How Did Tariffs Impact the Canadian Economy?
The immediate consequences of these tariffs for Canada were staggering. With Canada being one of the largest suppliers of steel and aluminum to the U.S., it faced higher costs, and a huge decline in exports. The tariffs led to the loss of an estimated 20,000 jobs in important manufacturing sectors, according to the Canadian government. The steel and aluminum industries were among the hardest-hit, with their trade with the U.S. accounting for billions in annual revenue.
In addition to steel and aluminum, Canadian agriculture, whiskey distilleries, and other manufacturing sectors were subject to retaliation by the U.S. government in the form of increased tariffs on Canadian exports. Together, the estimated overall cost of these trade disruptions to Canada’s economy was an eye-watering $16 billion a year.
Canada’s Initial Response: Retaliation and Diplomacy
Canada immediately and deliberately responded to Trump’s tariffs. Prime Minister Justin Trudeau’s government signaled that it would not retreat in the face of American aggression. Canada imposed retaliatory tariffs on $16.6 billion of U.S. goods in July 2018, covering steel, aluminum, whiskey, and agricultural products. In this campaign, the strategy was to not only respond to the economic hit from the U.S. tariffs but to send a clear signal that Canada wasn’t going to back down from protecting its economic interest.
Need for Strategy: Strike America Where It Hurts
Canada’s countertariffs were finely tuned to hit products from states that are critical to Trump’s political base. For example, Canadian tariffs on American whiskey were aimed at producers in Kentucky, a major whiskey-producing state, and tariffs on U.S. agricultural products were directed at states such as Iowa and Wisconsin, where farms are central to the economy. By targeting Trump’s supporters where it hurt, Canada tried to apply political pressure without raising tensions higher.
Reaching Out to U.S. Lawmakers on the Diplomatic Front
In addition to economic countermeasures, the Canadian government pursued a diplomatic solution to the dispute. Trudeau’s government held high-level talks with U.S. lawmakers, saying the tariffs were harming workers on both sides of the border. Canada also told the United States that those tariffs were damaging a long-standing trade relationship between the two countries that had been built on decades of co-operation.
Additionally, Canada brought a formal complaint at the World Trade Organization (WTO) in 2018, arguing that the U.S. tariffs were illegal. Federal legal efforts have not yet succeeded in removing tariffs, but they reflect Canada’s commitment to protecting its economic interests in international trade venues.
Enhancing International Trade Connections
Canada was prompted to reconsider its reliance on the U.S. as its main trading partner after Trump imposed tariffs. Canada had soon recognized the need to expand its trade relations and was actively looking to strengthen ties with other nations.
The CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)
Canada responded to the tariffs by joining a trade agreement between 11 countries called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Japan, Australia, and Vietnam. This trade agreement allowed Canadian goods access to new markets and gave the country preferential access to some of the world’s fastest-growing economies. Joining the CPTPP would reduce Canada’s reliance on the U.S. and open doors in Asia-Pacific markets.
Strengthening Canada’s Relationship with the European Union
Also, by ratifying the Canada-EU Comprehensive Economic and Trade Agreement (CETA), Canada is looking to fortify its alliance with the European Union (EU). CETA, which was signed in 2017, removed tariffs on 98% of goods traded between Canada and the EU, representing a huge economic opportunity for Canadian businesses. Lowering its dependence on the U.S. has allowed Canada to diversify its trade portfolio and tap into new economic potential in Europe.
Returning to China to Open New Doors
And diplomatic tensions with China have complicated Canada’s trade relations, but the country has still been able to deepen its ties with the world’s second-largest economy. The exports of Canada to China have been consistently increasing, especially in the field of agriculture, technology, and natural resources. While Canada’s ties with China are still touchy, the increase in trade between the two countries reflects the growing significance of Asia as an economic partner for Canada.
Here’s How Canadian Businesses Are Adapting
And while the Canadian government has led the charge against Trump’s tariffs, Canadian businesses have also had to be creative to come up with solutions to minimize the damage. From diversifying supply chains to reaching out to new brick-and-mortar markets, Canadian companies have managed to adapt and prosper even in an uncertain global-trade world.
Resilience and Diversification of Supply Chains
Canadian businesses have already implemented one of the main strategies, which is diversifying their supply chains. Many manufacturers have been looking to minimize dependence on United States suppliers and replace the U.S. material with alternate sources of raw material as you play out the U.S. tariffs on Canadian steel and aluminum. This has opened up ample opportunities for trade with countries such as South Korea, Japan, and Germany, where our products are in high demand.
Expanding into New Markets
Many Canadian firms are casting a wider net than the U.S. for growth. Canadian agriculture, for example, has benefitted greatly from exports to China, Japan, and the European Union, which have compensated for some of the loss from the U.S. tariffs. This diversification of markets has allowed companies to survive the storm caused by the trade row and maintain their competitiveness on the world scene.
Bridging The Divide Between Industries
In certain industries, Canadian companies banded together to pressure the government for assistance and protection against foreign foes. Similarly, the steel industry in Canada has collaborated with the government to secure financial support and other protective measures to protect local jobs. These joint endeavors have been crucial in the survival of Canadian sectors which were negatively impacted by the tariffs.
The Future of Canada-U.S. Trade Relations
With Trump’s presidency over, there is renewed hope that Canada-U.S. trade relations will ease tensions between the two countries. President Joe Biden’s administration is signaling that it is moving away from the combative trade approach of his predecessor, but the tariffs will remain in place for now.
The Biden Administration’s Trade Policy
While not yet fully repealed, Biden is generally expected to usher in a more cooperative U.S. approach to trade. Biden has indicated he is open to working with Canada to resolve the tariffs and other trade-related matters. This cooperative voice hints that the future of Canada-U.S. relations can be less antagonistic, creating lines of communication that lead to mutual gain for both nations.
Canada’s Long-Term Plan for Trade
Moving forward, Canada’s long-term approach will probably remain centered on diversification, enhancing current trade accords, and developing new partnerships. Canada’s reaction to the tariffs from Trump has highlighted the significant role of economic resilience as well as a flexible, forward-looking strategy for worldwide commerce. Canada is making an assertive move into the world economy with redirecting its attention to new opportunities.
Conclusion
Canada’s battle against Trump’s tariffs has become a watershed moment in Canadian trade history. Canada wins through calculated countermeasures, diplomatic negotiation, and broadening trade alliances, emerging from the economic tempest generated by those tariffs even bolstered, fortified by the ordeal. This new government is not a loss for Canada but a great opportunity to create some new friends to protect our economy. As the world’s trade dynamics change, Canada’s actions in the face of these tariffs will be a testament of resilience and strategic action.
FAQs
How did Trump’s tariffs impact Canadian industries?
Trump’s tariffs — most notably on steel and aluminum — hit Canadian industries hard, resulting in job losses, drops in Canadian trade revenue
