Goods from Canada, Mexico could attract 25% tariffs come Feb. 1, Trump says

U.S. President Donald Trump said his country could impose 25-per-cent tariffs on Canadian and Mexican goods as soon as Feb. 1, hours after he delivered an inauguration speech that only briefly touched on trade issues.

 

Earlier on Monday, Canadian politicians and business leaders breathed a sigh of relief, thinking they had avoided the damaging tariffs that Mr. Trump had vowed to implement for weeks leading up to his return to the White House.

 

Several U.S. media outlets had reported on Monday that Mr. Trump would direct government agencies to remedy persistent trade deficits and ensure trade deals prioritize U.S. jobs. Canada is among the countries the U.S. has a trade deficit with. But he stopped short of imposing the 25-per-cent tariffs on Day 1, something he had pledged in November.

 

By Monday night, the reprieve was over.

 

“We are thinking in terms of 25 per cent on Mexico and Canada because they are allowing vast number of people, Canada is a very bad abuser also, vast numbers of people to come in and fentanyl to come in,” Mr. Trump told reporters Monday night while signing executive orders in the Oval Office.

When asked when he would enact the tariffs, he replied: “I think we’ll do it Feb. 1.” Whether Mr. Trump will stick to that date is unclear.

 

The Canadian government, reacting to Mr. Trump’s Monday night comments, warned the United States against proceeding, saying it has prepared a retaliation plan that would hurt the U.S. economy.

 

“It would be a mistake for the American government to proceed with imposing tariffs. It would be a mistake in terms of the cost of living in the United States, in terms of jobs in the United States, the security of supply chains,” Finance Minister Dominic LeBlanc said.

 

He said the provinces and Ottawa last week agreed on a series of retaliatory measures.

 

Foreign Affairs Minister Mélanie Joly urged Canadians to remain united in the face of this threat.

 

“This is an important moment for Canadians,” she said. “We need to continue to fight for our interests, to defend jobs across the country, and we’re calling every single political leader across the board, across the country, to stand united, because now, more than ever, we need to make sure that we put country first.”

 

The Liberal cabinet is meeting at the Château Montebello resort, about an hour outside of Ottawa, as Mr. Trump takes office, and using the two-day retreat to plan Canada’s response to the tariffs.

 

On Monday night, Mr. Trump also mused again about imposing a universal tariff on all countries, citing America’s trade deficits.

 

“You put a universal tariff on anybody doing business in the United States because they’re coming in and they’re stealing our wealth, they’re stealing our jobs, they’re stealing our companies,” he said. “They’re hurting our companies. So you put a tariff on to keep them from doing that.”

 

Even before Mr. Trump’s late-evening comments, political and industry leaders said Canada must use any additional time to build its case with the new administration for continued free trade between the two countries, though they warned the lack of clarity will weigh on Canada’s economy and could delay critical investment decisions.

 

The White House released a memorandum Monday directing federal agencies to investigate and remedy persistent U.S. trade deficits that harm the U.S. economy. The memo also calls for agencies to ensure trade deals, including the United States-Mexico-Canada Agreement (USMCA), prioritize American workers, farmers and businesses.

 

Mr. Trump’s inaugural address held promise for Canada – trade occupied just 37 seconds of his half-hour speech, excluding time for applause.

 

But Ontario Premier Doug Ford took little solace, suggesting tariffs were still coming and would target Canada, and specifically Ontario’s manufacturing sector.

 

“Make no mistake about it, he’s coming for us. Is it tomorrow? Or is it a month down the road?” Mr. Ford said.

 

Mr. Ford’s office declined to comment on Mr. Trump’s new Feb. 1 target date for tariffs.

 

The announcement the Trump administration is setting up an external revenue agency to collect tariffs is “a proof point that the president is serious about tariffs,” B.C. Finance Minister Brenda Bailey said.

 

Currency markets were whipsawed on Monday, with the Canadian dollar briefly spiking above 70 U.S. cents in the morning as investors digested reports of a tame approach to tariffs. On Monday night, however, the loonie tumbled when Mr. Trump floated steep tariffs that could start within two weeks.

 

Within industry, there was a widespread feeling that Mr. Trump’s tariffs may be delayed, but they’re certainly not cancelled, and that this should create a moment of urgency for officials to act.

 

“Everyone took a little sigh of relief,” when Mr. Trump did not single out Canada and kept his comments about tariffs at a high-level, said Dennis Darby, CEO of the industry group Canadian Manufacturers & Exporters (CME), who watched Mr. Trump’s speech in the Canadian embassy in Washington with hundreds of other Canadians.

 

“We said all along that the best hope for Canada is that there is a process in place to assess [tariffs], and we’re hopeful that might be the case, but we still haven’t seen what executive orders he is signing today,” he said before Mr. Trump’s Monday night press conference.

 

The threat of tariffs has already had a chilling effect on manufacturing investment in Canada. A CME survey of 300 companies, conducted in December, found that 30 per cent have postponed planned investments and 22 per cent have implemented hiring freezes in response to trade uncertainty. Nearly half said they’d consider shifting production to the U.S. if tariffs are implemented.

 

Mr. Darby said that Canadian officials and executives need to use whatever delay there is on implementing tariffs to press Canada’s case with the new U.S. administration.

“We’ve just got to do our best to explain that in fact the U.S. is at almost full production now … and really Canada provides a huge stockpile of everything from oil and gas to auto parts to food products to the U.S., and that should be seen as a good thing.”

 

For Canada’s auto sector, which is acutely exposed to tariffs because of its deep integration with the U.S., Monday presented a hint of clarity about Mr. Trump’s plans around trade going forward.

 

Automotive Parts Manufacturers’ Association president Flavio Volpe interpreted Mr. Trump’s stated plan to revisit the USMCA deal as a sign he is looking for continental alignment on taking a tough line with China.

 

Canada is already on board with that approach, Mr. Volpe suggested, while Mexico is moving toward it.

 

“We have work to do to defend our interests,” he said, “but this is a helpful framework.”

 

Yet with the lingering threat of tariffs, Canada’s aluminum sector is bracing for a period of volatility.

 

“Uncertainty is something that we will have to bear for the next four years, and that’s the major thing that we have to address as a country,” said Jean Simard, CEO of the Aluminium Association of Canada.

 

“How do we live with uncertainty? How do we protect our industrial base, our economy, and potential investments in Canada?”

 

With reports from Jeff Gray, Justine Hunter, Niall McGee, Adam Radwanski, Mark Rendell and Nojoud Al Mallees

 

 

 

 

This article was first reported by The Globe and Mail