The largest trading partner with the United States, Canada, has swiftly promised to match tariffs placed on steel and aluminum imports. As an exemption for weighty tariffs expired on May 31st and a NAFTA agreement vaporized with a last-minute sunset clause, it appears a trade war is all but certain with America’s closest neighbor.
Without delay, Canada’s Prime Minister, Justin Trudeau, announced tit-for-tat tariffs on American-made goods shipped north of the border. The Canadian tariffs include products like whisky, motorboats, flat-rolled steel, coffee, and prepared foods made with beef. A host of other products are listed, many for use in the manufacturing industry.
The tariffs imposed by Canada are structured to be dollar for dollar. Currently, the value of steel and aluminum tariffs imposed by the Trump administration sits at $12.8 billion US, or $16.6 billion CDN. Canada’s retaliatory tariffs are set to begin on Canada Day, July 1st.
Trade Partners Firing Back
All three nations affected by the expiring exemption have been vocal and reactive about the imposed tariffs. It’s been suggested that the European Union will put higher duties on cranberries and Harley-Davidson motorcycles. Mexico’s Economy Ministry has stated it will target pork, cheeses, fruits, and steel and pipe products. Canada’s tariffs list also includes maple syrup.
Trudeau was visibly frustrated as he addressed media, and his comments more pointed than his typical maple syrup-sweet demeanor. “The American administration has made a decision today that we deplore,” he said. “They don’t quite understand this is going to harm Americans.”
“We have to believe that at some point their common sense will prevail. But we see no sign of that in this action today by the U.S. administration.”
Tariffs Could Impact Economy Negatively
There’s bound to be a significant impact on the American economy due to the imposed duties, and across several industries. Canada’s Minister of Foreign Affairs, Christia Freeland, stated, “This is the strongest trade action Canada has taken in the post-war era.”
“This is a very strong response, it is a proportionate response, it is perfectly reciprocal,” said Freeland. ”This is a very strong Canadian action in response to a very bad U.S. decision.”
Retaliatory tariffs have been announced that will assuredly impact manufacturing on both sides of the U.S.-Canada border.
The Effect on Automotive
With both steel and aluminum a linchpin in the tariffs, the automotive industry can be certain to take a hit. Vehicle manufacturing costs will rise with massive tariffs on both sides of the border. Unquestionably, higher manufacturing costs filter down to the consumer, who end up paying more to purchase vehicles. New vehicle sales could very well experience substantial slumps.
Tariffs on steel and aluminum will result a spike in employment at local metal producers. However, they could have serious implications elsewhere. Ben Zycher, a scholar with Washington-based think-tank American Enterprise Institute, infers, “There’s no question you lose more jobs than you gain. That’s simply the reality of any kind of protectionist move. Protectionism makes the economy smaller by imposing artificial costs.”