Trump all over the map: tariffs, Colombia lessons and Ontario’s new plan
Bracing for impact
The federal government made last-ditch attempts this week to head off the tariffs Donald Trump has promised to bring in on Feb. 1 – including sending the president video evidence of what Canada is doing to secure its border with the United States.
But amid conflicting signals from Washington it’s unclear what will happen when that deadline arrives. White House press secretary Karoline Leavitt said the Feb. 1 plan “still holds,” but a different message emerged as Trump’s nominee for commerce secretary was questioned at a Senate committee hearing.
Howard Lutnick said Canada and Mexico can avoid tariffs this week if they take effective action to prevent fentanyl from crossing their borders (more below).
Canadian officials sent video clips to Trump and members of his administration to show the steps Canada has already taken to stem the flow of migrants and illegal drugs across the border. Trump associates said Canada must demonstrate it is already acting, not just promising to do more.
As Canadian officials tried to sort all that out, the Trudeau government promised a “dollar-for-dollar” response if tariffs are imposed. The details are not publicly known; they will depend on exactly what Trump does, or if he acts at all by the Feb. 1 deadline. At the same time, the government has reportedly prepared a “multi-billion-dollar, pandemic-style bailout” if Trump does go ahead with tariffs at the threatened level of 25 percent.
The Globe and Mail reported the plan includes such measures as waiving the one-week waiting period for employment insurance benefits. It would also involve spending on new programs to help workers who lose their jobs and businesses targeted by whatever tariffs Trump imposes.
The government could boost EI benefits without approval from Parliament, which has been prorogued until March 24. But big support programs would require parliamentary approval, meaning party leaders would have to agree to bring back the House of Commons to pass an emergency support program.
The uncertainty around tariffs has set off a debate among politicians and experts on what kind of response Canada should offer. Some (such as Ontario Premier Doug Ford) are urging a strong, across-the-board retaliation; others say the response should be carefully tailored depending on which sectors are most targeted by any action from Washington.
In particular, federal ministers are careful to say that no part of the country should be expected to suffer more than any other. That’s a nod to concerns in Alberta that Ottawa might impose an export tax on its oil and gas exports to the U.S. Alberta Premier Danielle Smith said that is something “Albertans are just simply not going to accept.”
The prospect of stiff tariffs extended to Canada’s monetary policy this week. The Bank of Canada cut its key interest rate by 25 basis points to 3 percent, with Governor Tiff Macklem saying tariffs present a “major uncertainty” to the country’s economic prospects. “This could be very disruptive to the Canadian economy and is clouding the economic outlook,” he said.
Tariffs now or later
Donald Trump’s nominee for secretary of commerce held out hope this week that Canada and Mexico can avoid punishing tariffs if they act quickly to secure the flow of migrants and fentanyl into the United States.
Howard Lutnick told the Senate Commerce Committee that Trump’s threat to impose 25-percent tariffs on the two countries is separate from a broader effort by the Commerce Department to review U.S. trading relationships by April 1.
“This is a separate tariff to create action from Mexico and action from Canada,” Lutnick said. “And as far as I know, they are acting swiftly, and if they execute it, there will be no tariff.”
He went on: “You know that the [drug] labs in Canada are run by Mexican cartels. Respect America. If we are your biggest trading partner, show us the respect. Shut your border. And end fentanyl coming into this country.”
Canadian officials have argued that only a tiny amount of fentanyl crosses from Canada into the U.S.: less than 20 kilograms was seized last year, according to U.S. customs data. But that has not stopped Trump from making it a major issue with Canada.
Even if Canada escapes tariffs on Feb. 1, Lutnick made clear they remain a possibility as a result of the review of unfair trading practices by the Commerce Department. Lutnick said he would work to secure better access for American farmers to Canada’s dairy market. Canada’s supply management system for dairy, which restricts U.S. imports, has long been an irritant for American trade negotiators.
Lutnick is CEO of the Wall Street investment firm Cantor Fitzgerald. He is a vocal advocate of tariffs, arguing like Trump that they could partly replace income tax as a source of revenue for the U.S. Treasury. He is also one of the most prominent advocates of cryptocurrency in the global financial community.
Ontario election
Canada’s biggest province is going into an early election campaign, and Premier Doug Ford says it’s all because of the threat of sanctions from the Trump administration.
Ford called a snap election this week for Feb. 27, saying he needs the backing of Ontarians to push back against Donald Trump. “This is going to be a battle for the next four years, and I want to make sure I have a strong mandate to outlast President Trump,” he said.
Ford’s Progressive Conservatives already had a solid majority of 79 seats in the 124-seat Ontario legislature and an election wasn’t scheduled until June of 2026. As a result, opposition leaders accused Ford of using the Trump threat as an excuse to call a vote at a moment when he is far ahead in opinion polls.
Ford, however, argued he needs a fresh mandate because the Trump threat wasn’t contemplated when his party won the last time, in 2022, and Ontario may have to spend heavily to support targeted sectors. “We will invest tens of billions of dollars in new spending to keep our workers working,” he said as he launched his campaign in Windsor, with the Ambassador Bridge to Detroit prominent in the background.
The PC’s election slogan: “Protect Ontario.”
Fortress Am-Can
Doug Ford has been promoting a concept he calls “Fortress Am-Can” as an alternative to Donald Trump’s America First approach that risks cutting Canada out of the U.S. market. Ontario released the entire plan this week, with Ford calling it a proposal for “a renewed strategic alliance between America and Canada.”
The plan calls for “balanced two-way trade” with Canada and the United States, imposing common tariffs against Chinese imports, and the prevention of possible Chinese acquisition of key resources or strategic technology. It recommends strengthening joint Canada-U.S. auto production, with the goal of producing a million additional vehicles by 2028.
Fortress Am-Can would also create a new “Am-Can Critical Mineral Security Alliance” to supply more critical minerals from Canada to the U.S. And it would increase the amount of “energy of every type” supplied by Ontario to the U.S., including the first small nuclear reactors in the G7.
Ford said he has been promoting “Fortress Am-Can” with members of the U.S. Congress, governors and advisers to the Trump administration. He said Mexico should be cut out of any cross-border deal if it lets itself be used as a “backdoor” for Chinese goods to access the American market.
Canadian energy vs. Trump
Canada’s energy industry has been understandably rattled by U.S. tariff threats that it never anticipated. “For so many years — decades — Canada was urged by governments, by companies themselves, by investors to integrate our energy systems. And we’re much more integrated North-South than we are East-West,” explains Janet Annesley, chief sustainability officer at Kiwetinohk Energy, on a recent episode of PPF’s WONK podcast
Jackie Forrest, executive director of the ARC Energy Research Institute, says the Trump tariff could add $15 or $16 to the price of a barrel of oil. She breaks down how this might be felt across the oil industry: “Especially in the Midwest where the margins are very narrow, they really can’t afford to pay all that. So I think that will result in Canadian producers having to take some price discount… The other extreme bookend is they absorb it all and then it gets passed through to refined product pricing. But because many refiners don’t actually set the price of refined products in their market, I don’t think they’re able to pass all of that on to the consumer as well. There’s probably going to be some shared pain.”
But there may be a silver lining, says Bryan Cox, general manager of external affairs at Petronas Canada and former head of the Canadian LNG Alliance. There is an opportunity to “actually look at energy security through that global lens, which I think Canada has not done over the past several years.”
At PPF’s Matter More tour in Vancouver and Calgary this week, energy security was also top of mind. Industry experts said Canada is missing critical opportunities for energy development. It needs to attract foreign investment and get new energy projects off the ground.
Colombia lessons
Donald Trump waged a 10-hour trade battle with Colombia this week, and how it unfolded contains lessons for Canada, Mexico and other countries threatened by tariffs.
Trump was enraged when Colombian President Gustavo Petro refused on Sunday to allow a U.S. military plane carrying migrants being deported from the United States to land in his country. Trump immediately announced an “emergency 25-percent tariffs on all goods coming into the United States” from Colombia, as well as travel bans and other sanctions against Colombian officials.
Faced with that broadside Petro quickly relented and Trump called off the tariffs within hours. For the president, the lesson was straightforward: “America is respected again.”
The episode underlined how Trump’s instinct is to turn immediately to tariffs, or the threat of them, to get his way on issues that have nothing to do with trade. “We know that President Trump is using tariffs as a way to put pressure on countries,” Foreign Minister Mélanie Joly said this week. “That’s what he’s doing.” At the same time, Trump showed he is prepared to call off tariffs and sanctions if he gets what he wants.
In the longer run, Trump’s willingness to wield American power without apology rather than build alliances with friendly countries may backfire. Jorge Heine, a former Chilean ambassador and professor at Boston University, told POLITICO that for South America “the message is that it’s not a good idea to be very closely interlinked with the United States, because you might pay a heavy price.”
Heine noted China sees an opening if U.S. allies see Washington as unreliable or even hostile. China’s ambassador to Colombia posted an overture to the country on social media, noting the two countries are having their “best moment” in 45 years of diplomatic relations. China has also reached out to the Canadian government, suggesting relations and trade could improve.
Playing defence
Canada’s defence minister now says this country can reach the NATO target of spending 2 percent of GDP on defence much faster than it planned. But Donald Trump is already demanding a lot more.
Defence Minister Bill Blair told CBC News that Canada can get to 2 percent by 2027. Prime Minister Justin Trudeau laid out a plan last summer that would not have Canada meeting the target until 2032, a timeline that was widely criticized as being much too slow.
That goal has not been officially changed but Blair said it’s possible to go faster by accelerating military projects, such as contracts for submarines and ammunition, and spending more to improve conditions for armed forces personnel. “My goal is to do it as quickly as possible and I’m increasingly confident we’ll be able to,” said Blair.
But Trump has moved the goalposts on what he wants to see from NATO members. He told the World Economic Forum in Davos, Switzerland, that he intends to ask NATO countries to increase military spending to 5 percent of GDP, “which is what it should have been years ago.”
Trump has singled out Canada as one of the laggards and claimed that “we take care of their military,” part of his argument that this country might as well become the 51st U.S. state.
No NATO member currently spends 5 percent of GDP on its military. The closest is Poland, at 4.12 percent; the United States itself spends only 3.38 percent on defence. Two former top Canadian military leaders, Vice-Admiral Mark Norman and Gen. Tom Lawson, told CTV News that 5 percent is a “preposterous” goal for this country.
Still, all NATO countries are under pressure to go beyond 2 percent. Secretary-General Mark Rutte said this week he will push for more at the alliance’s next summit meeting in June. “We know that the goal of 2 percent, set a decade ago, will not be enough to meet the challenges of tomorrow,” Rutte said. “That means we need to spend more on our defence now.”
A Trump bump
The return of Donald Trump is good for some businesses in Canada. Lawyers who help Americans living in this country renounce their U.S. citizenship say they’ve never been busier.
Dual U.S.-Canadian citizens must file tax returns with the Internal Revenue Service, which can be complicated and expensive. That can continue even after death: U.S. citizens, no matter where they reside, can also be liable for estate taxes in the United States.
Tax lawyers in Canada told CBC News this week they’ve seen a spike in inquiries since Trump’s election. Alexander Marino, director of U.S. tax at Moodys Tax Law in Calgary, said there are political overtones as well. “I can’t deny that most U.S. expats, in my experience, tend to be more left-leaning than right-leaning,” he said. “For a lot of people, the election results are a bit of the straw that broke the camel’s back.”
Marino said his firm usually offers five to seven seminars a year on how to renounce U.S. citizenship. This year it may schedule up to a dozen due to the “Trump bump” in demand.
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