(Bloomberg) -- Canada braced for economic turmoil and laid out a retaliation plan after President Donald Trump signed an executive order imposing 25% tariffs on almost everything the US imports from the country, and 10% on energy.
Prime Minister Justin Trudeau, speaking from Parliament Hill on a bitterly cold night in Ottawa, said Trump’s move left his government with no choice but to respond forcefully. Canada will place 25% counter-tariffs on C$155 billion ($107 billion) worth of American-made products, starting Tuesday.
The first phase will touch about C$30 billion of goods from US exporters, including orange juice, peanut butter, wine, coffee, motorcycles and cosmetics. A much larger list of US-manufactured products — cars and trucks, steel, aluminum, beef and boats, among other items — will be subject to tariffs later in February after a 21-day consultation period.
Trudeau began his announcement by saying he wanted to speak directly to Americans, and he invoked the shared history of the two neighboring countries and their longstanding security and military alliances.
“From the beaches of Normandy to the mountains of the Korean peninsula, from the fields of Flanders to the streets of Kandahar, we have fought and died alongside you during your darkest hours,” Trudeau said.
“Yes, we’ve had our differences in the past, but we’ve always found a way to get past them. As I’ve said before, if President Trump wants to usher in a new golden age for the United States, the better path is to partner with Canada, not to punish us.”
Trump’s executive orders invoked emergency powers to justify tariffs starting at 12:01 a.m. Washington time on Tuesday, blaming Canada and Mexico for insufficient action to curb the production and trafficking of fentanyl, the powerful synthetic opioid that has led to hundreds of thousands of deaths in North America.
Trump’s emergency declaration means he won’t wait for formal procedures outlined in the US-Mexico-Canada Agreement, which the president signed in 2020 and hailed as a “colossal victory” in an update to a North American trade deal that had been crafted in the early 1990s.
Trump’s order included a clause setting out even higher duties if Canada retaliated. But Trudeau said Canadians understand that the country must respond in a way that is “measured but forceful” — and that he was not looking to escalate the situation.
Trudeau and his officials have mulled fighting back with export levies on oil and gas as a way to crank up the pain for Americans and raise the pressure on Trump. But Trudeau appeared to back away from that idea, at least partially, given the opposition of some provincial premiers to the idea, including the leader of oil-producing Alberta.
“What is extremely important for me, and I think for all the premiers, is that no one region of the country or one industry carries a larger burden than anyone else,” Trudeau said. “We will not be moving forward on issues that further divide the country, which is why we’re working with all premiers to look at different ways we can encourage the Americans to step back from these trade actions.”
The government is also considering measures related to critical minerals the US needs, Trudeau said. He encouraged Canadians to buy locally made products and skip US vacations.
The prime minister also said his government would “support Canadians through this challenging time,” and that he would not need to recall Parliament to do so. In early January, he requested the suspension of Parliament until March 24 in order for the Liberal Party to select a replacement for him as leader and prime minister.
No More Liquor
Other Canadian politicians rolled out their own measures. David Eby, the premier of British Columbia, directed the provincially owned liquor distributor to remove some alcohol brands made in Republican-led states from the shelves of retail stores — and to cease further purchases. The province will adopt a Canada-first policy for all government procurement, he said.
“President Trump’s 25% tariffs are a complete betrayal of the historic bond between our countries and a declaration of economic war against a trusted ally,” Eby said.
Quebec Premier Francois Legault said he has asked officials to review all US suppliers who bid on provincial projects, and to penalize US companies looking to work with the Quebec government.
“Trump’s tariffs will devastate our economy,” said Doug Ford, leader of Ontario, Canada’s most populous province and the home to an automotive industry that’s tightly integrated with the US and Mexico.
Rapid Impact
Business groups responded with outrage and dismay to Trump’s order. The Canadian Chamber of Commerce said it was a “profoundly disturbing” decision and will “drastically increase the cost of everything for everyone.”
Linda Hasenfratz, executive chair of auto parts manufacturer Linamar Corp., said in an interview before the announcement: “It will lead to markets collapsing, sales dropping, layoffs, all the things that President Trump doesn’t want.” Linamar operates in all three USMCA countries.
“The impact is going to be rapid, in terms of our customers on the auto side. I just don’t think they can sustain production, which in turn has a pretty immediate impact on our production levels.” The US is by far Canada’s most import market for exports.
The US had a trade deficit in goods of about $55 billion in the first 11 months of last year, exporting $320 billion and importing $375 billion. Crude oil is the biggest reason for the gap — excluding energy, the US had a trade surplus with Canada.
Pierre Poilievre, leader of the Conservative Party, which is ahead of Trudeau’s Liberals in public opinion polls, called for a “Canada First” dollar-for-dollar retaliation against the US, echoing Trump’s “America First” slogan.
Poilievre said income from Canadian tariffs should be earmarked for supporting workers and businesses, alongside tax cuts, expanding energy and trade infrastructure, and investing in its military and borders.
A softwood lumber trade group in British Columbia decried what it called “a punitive, unjustified protectionist measure” and said Trump’s tariffs will increase building costs at a time when affordability is already a concern for Americans. The new tariffs add to existing duties already imposed by the US.
Alberta Premier Danielle Smith took partial credit for the lower 10% tariff on energy and reiterated her opposition to restricting or taxing Canadian energy exports in retaliation.
--With assistance from Jacob Lorinc, Robert Tuttle, Mathieu Dion and Melissa Shin.
(Adds more details and quotes from Trudeau and provincial premiers, starting in the third paragraph.)
