Trump’s Liberation Day ‘fundamentally changes’ global trade
Global shakedown
President Donald Trump imposed sweeping new tariffs on scores of countries around the world in what he called “Liberation Day” for the American economy. But the White House said Canada and Mexico will be spared new levies on goods that fall under the existing USMCA/CUSMA continental trade deal.
Trump announced a minimum tariff of 10 percent on most countries, but some are facing much higher rates. China will be hit with an additional 34 percent on its exports to the U.S., the European Union with 20 percent and Japan with 24 percent. “Our country has been looted, pillaged, raped and plundered by nations near and far, by friend and foe alike,” Trump declared.
Although Canada was not hit by new tariffs on Wednesday, it must still deal with other levies imposed by Trump. The tariffs imposed in March on both Canada and Mexico to force both countries to tighten border controls on migrants and illegal drugs (see below) remain in force. Those levies amount to 25 percent on goods that are not compliant with the CUSMA deal, and 10 percent on energy and potash.
Tariffs of 25 percent on steel and aluminum also remain and Trump confirmed that 25-percent tariffs on autos and auto parts are coming into effect this week.
The precise impact of the auto levies aren’t clear, since they won’t apply to U.S.-made content. In addition, the White House said it is still considering tariffs on what it regards as “strategic sectors” such as lumber, pharmaceuticals and semi-conductors.
Prime Minister Mark Carney said Trump’s new tariffs “are going to fundamentally change the international trading system.”
He noted Trump did respect the existing Canada-United States-Mexico Agreement by not imposing additional measures on its North American neighbours, but the tariffs already put in place will “have impacts on millions of Canadians across the country.” Carney said he will announce a response on Thursday after meeting with the premiers.
At the White House, Trump repeated many of his grievances about Canadian economic policies. He claimed this country imposes tariffs of 250 to 300 percent on U.S. dairy products; in fact, American producers do not pay such rates as long as they stay within agreed-on quotas, levels they have never exceeded.
Trump also claimed the U.S. “subsidizes” Canada to the tune of $200 billion a year, a figure that apparently includes Canada’s trade surplus with the U.S. and American military spending that Trump argues comes from protecting this country. (Those numbers do not come close to the $200-billion figure.)
Trump’s mention of dairy is a strong signal that his administration wants to attack Canada’s system of supply management, a longstanding trade irritant between the two countries.
At a campaign event in Montreal on Friday, Carney promised that supply management will continue to be “off the table” in any Canada-U.S. trade talks. Conservative Leader Pierre Poilievre and NDP Leader Jagmeet Singh have also pledged to protect supply management, a touchy issue especially in Quebec.
LISTEN NOW: On the WONK podcast this week, Amanda Lang talks to Roger Martin about the problems with Canada-U.S. trade and why it might be time to ‘ask the EU question.’
A ‘fake emergency’
A group of U.S. senators challenged Donald Trump’s justification for imposing tariffs on imports from Canada. Their leader, Democratic Sen. Tim Kaine of Virginia, says Trump’s argument that fentanyl is flooding into the United States from Canada is “specious” and a “fake emergency.”
“I’m challenging the President’s assertion that there’s a Canadian fentanyl problem because we should be truthful and not lie to people,” Kaine said this week. “Canada is not an adversary, it’s an ally. And tariffs are going to hurt Virginians and Americans badly.”
Kaine introduced a resolution to undo the tariffs, which Trump justified by invoking the International Emergency Economic Powers Act to declare a national security emergency at the Canadian and Mexican borders.
The Senate narrowly approved the measure on Wednesday night, with a group of Republicans joining Democratic Senators.
Republicans Rand Paul of Kentucky was a co-sponsor of the resolution and several other Republicans, including Susan Collins of Maine, Lisa Murkowski of Alaska and Mitch McConnell of Kentucky, supported it.
On social media Trump blasted the four Republicans supporting the resolution as “disloyal.” The resolution will now to go to the Republican-controlled House, where it will almost certainly stall.
A major U.S. intelligence report last week did not include fentanyl from Canada among current threats to the United States. The Annual Threat Assessment from the Office of the Director of National Intelligence does not mention the border issue, despite Trump’s claim that fentanyl coming across the northern border poses “an unusual and extraordinary threat.
Also, new data released to The Globe and Mail further undercuts Trump’s argument. It shows that barely one-tenth of one percent of fentanyl seizures at the border have been positively attributed to Canada by the U.S. border agency.
The unreliable friend
A blue-ribbon panel of business leaders and foreign affairs professionals says Canada can no longer trust the United States and must take major steps to reduce its reliance on its neighbour.
The Expert Group on Canada-U.S. Relations says in a report this week that the Canadian government should not rush into negotiations for a new trade deal “until there is greater clarity in the current political mayhem in Washington about where the administration’s trade policies are ultimately headed.”
In the report, titled “Broken Trust: Managing an Unreliable Ally,” the group says: “The United States, under Donald Trump, has become an unreliable partner. Its longstanding allies can no longer be confident that America will respect its treaty obligations to come to their defence. That is particularly true for Canada.”
They go on: “The administration’s resort to coercion, rather than persuasion and soft power, inverts its relationship with other countries, particularly those that rely on it most. It transforms the United States from the guarantor of stability and the rule of law into a threat to be mitigated. It forces other countries to reexamine the assumptions on which their policies are based.”
The Expert Group says Canada must diversify its trading and security relationships; become more globally competitive; and strengthen its defence capability. “We cannot entrust our survival to a country whose President’s official policy is that we should not exist,” it says.
The Expert Group is co-chaired by Perrin Beatty, a former president of the Canadian Chamber of Commerce and minister of foreign affairs under Brian Mulroney, and Fen Osler Hampson of Carleton University. Its report is signed by leaders in business, foreign affairs, politics and the military.
Pushback in the North
Legislators in Alaska are pushing back against Donald Trump’s talk of making Canada the 51st American state. Republican Representative Chuck Kopp proposed a joint motion in the state legislature saying Alaska doesn’t support Donald Trump’s annexation threat or trade war with Canada.
“This resolution is to present a unified voice of restoration and reconciliation among old allies and friends at a time when trade restrictions have jeopardized and challenged that relationship,” Kopp told the Alaska senate resources committee.
“The trust and affection that we hold for our Canadian neighbours extends to their identity as citizens of the sovereign nation of Canada … We can’t imagine Alaska without Canada.”
The resolution passed the state house and was sent to the Senate. The president of the senate, Republican Cathy Giessel, said: “I can say, genuinely, I love Canadians, because my youngest son is a dual citizen. He lives in a different province.”
At the same time, one of two senators who represent Alaska in Washington, D.C., criticized a proposal in British Columbia to levy new fees on trucks headed to the state. Republican Dan Sullivan called that a “dangerous game” and warned B.C. Premier David Eby that “you don’t want to mess with Alaska.” He said the state might retaliate by having U.S. cruise ships bypass ports in B.C., depriving them of tourist dollars.
More fighter jet doubts
The air force general who recommended that Canada purchase the F-35 fighter jet has changed his mind.
Retired Lt.-Gen. Yvan Blondin says Lockheed Martin’s F-35 was the best choice for Canada as long as the United States was holding defence alliances together, but Washington has become too untrustworthy.
In a social media post, Blondin wrote: “Reliance on a U.S. defence umbrella, a critical factor since the end of WW2 for so many countries, is no longer guaranteed. No affected country can afford to close its eyes and hope that 2026 or 2028 elections in the U.S. will bring everything back to ‘normal’… and not happen again. The toothpaste cannot go back in the tube.”
Blondin said it would be “irresponsible” to rely solely on the F-35 because the U.S. controls all aspects of the plane. “The reality is that, without U.S. consent, no country can hope to operate the F-35 for long,” he wrote.
Prime Minister Mark Carney has ordered a review of Canada’s contract to purchase 88 F-35s in light of the Trump administration’s changes in security policy.
Other countries are also concerned about relying on the F-35 and other U.S.-made military systems. In New York magazine, Jeff Wise writes that Portugal and Germany are having second thoughts about the F-35 and doubts about the reliability of Washington have cast a shadow over the entire U.S. defence industry. “If the ‘arsenal of democracy’ no longer stands on the side of democracies, what is it good for?” he asks.
At the same time, some analysts argue the F-35 is still the right choice for Canada. J.L. Granatstein writes in The Calgary Herald this week: “Cancelling the F-35 contract would outrage Washington, which already sees Canada as a freeloader on defence. Meanwhile, flying two types of fighter jets would be more expensive to maintain and further tax the RCAF, which already lacks enough qualified pilots, specialist mechanics, flight instructors and ground crews.”
Tensions at the border
The U.S.-Canada border has become increasingly tense for Canadians as American authorities implement the Trump administration’s tougher policies on people crossing into the United States.
Immigration lawyers are warning travellers to expect increased scrutiny from border agents. “It isn’t as if people are being barred from entering, but nearly every one of them is being subjected to more questioning than they may have ever experienced,” Kevin Dyer, a partner at New York-based immigration law firm Dyer Harris LLP, told The Globe and Mail. “Be prepared for what could be a hostile conversation at the border.”
Multiple travellers have been stopped at U.S. border crossings and in a few well-publicized incidents have been held in custody.
Jasmine Moody, a Canadian consultant for an American company, was detained for 12 days in early March after attempting to get a new TN visa at the San Diego-Tijuana border crossing.
Canadian citizens born in Iran appear to be attracting special scrutiny from U.S. border agents. Six Iranian-Canadians told The Globe and Mail they were recently stopped from entering the U.S. using Canadian passports. “They said the treatment they receive at the border has become more aggressive, including being detained for hours for questioning, causing them to miss flights, as well as being fingerprinted,” The Globe reported.
The Trump administration has also changed the rules for Canadians and others planning an extended stay in the United States. Starting on April 11, all foreign nationals who plan to stay for more than 30 days will have to register with U.S. Citizenship and Immigration Services.
The Canadian government has updated its advice to Canadians going to the U.S. and warns: “Failure to comply with the registration requirement could result in penalties, fines and misdemeanor prosecution.”
The chill in cross-border relations has already had a big effect on Canadians’ travel plans. Both Air Canada and WestJet report that transborder bookings for the next six months are down substantially, year over year. Air Canada says they are down 10 percent while WestJet puts the figure at 25 percent.
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