MONTEBELLO, QUE. — It’s one thing to talk tough and say Canada should throw a hard, dollar-for-dollar counterpunch in response to Donald Trump’s 25 per cent tariff threat.
It’s a whole other thing to actually land that blow. Even if you want to.
Prime Minister Justin Trudeau said Tuesday he supports the “principle” of a dollar-for-dollar counteroffensive to match Trump.
How to do that is the hard part.
In an interview, Finance Minister Dominic LeBlanc said while there are not technical or legal barriers to matching Trump with a tough response, “there are economic and political barriers — but they can be overcome.”
“Let’s say we’re hit with a 25 per cent tariff,” he said. “If that’s the premise, the country will absolutely want a firm, tough, proportionate response. To not do that would be a complete abdication of our responsibility to protect the national economic interest.“
But what exactly is proportionate? Does that mean equal? Not necessarily.
Canadian officials, who the Star agreed not to identify because they were not authorized to discuss the strategy publicly, said Ottawa may end up having to levy duties of more than 25 per cent on some American imports — meaning that tariffs of 35 per cent, 50 per cent, or even 100 per cent on certain American goods are not out of the question. That’s especially so if there are no easy replacements of some products for Canadian consumers to switch to, something the prime minister hinted at Tuesday.
Canada has a smaller base of imports to start from. Officials say a matching counter-response would entail tariffs on some $600 billion worth of U.S. goods imported by Canada, and result in $150 billion in duties collected — ultimately on the backs of Canadian consumers, because importers can be expected to pass their higher costs onto customers.
“You only make the final decisions on the precise measures when you see what the Americans do,” LeBlanc said.
Will the U.S. president stick to a broad, “across the board” import duty on all Canadian shipments stateside? If so, Canadian officials say, it would have an “absolutely massive” impact on the price of everything from Canadian potash or uranium to oil, hydroelectricity, wood and paper products, even fruits and vegetables in American grocery stores. According to Ottawa, Mexico and Canada supply 50 per cent of the fresh fruit and 83 per cent of the vegetables sold in the U.S.
Would Trump exempt Canadian oil or hydroelectricity? Would he carve out any exceptions for other goods such as potash, without which Ottawa argues U.S. farmers could see lower crop yields, and higher food prices, which could contribute to inflationary pressures in the U.S. Would Trump apply different tariffs on different sectors?
During the last renegotiation of the North American Free Trade Agreement, Trump imposed 25 per cent tariffs on steel and 10 per cent aluminum tariffs on Canada, Mexico and the European Union, all of which he had previously exempted. Canada responded with more than $16 billion worth of dollar-for-dollar tariffs on a range of products; it took a year for the two countries to strike a deal to lift the mutual penalties.
The Star has reported that Ottawa could respond this time with an immediate tariff on 10 American imports, targeted at politically sensitive items. (In 2018, it put duties on goods like Florida orange juice, and bourbon and playing cards made in Kentucky.) The plan is to escalate as needed to levy import duties on $37.6 billion worth of American imports, up to a larger target with penalties on $150 billion worth of American imports. And the Trudeau government has not ruled out export tariffs or curtailing any Canadian energy exports to the U.S.
Flavio Volpe, who is head of the Canadian Automotive Parts Manufacturers Association and a member of the advisory council Trudeau named last week, said the Trump’s 25 per cent threat is much more serious and a harder one to “match.”
“We lack the heft to match economywide tariffs,” said Volpe. “We still ultimately need to be strategic and weigh the impact on domestic production of our countermeasures. Country first, but the math will matter.”
Other big political questions remain about what lies ahead.
How does the federal government ensure the political pain points are not felt by one province or region — as Alberta fears? How does it ensure maximum pressure is applied to American customers and decision-makers so that U.S. tariffs are short-lived? How does Ottawa minimally hurt Canadian consumers (who may not be able to switch to lower-priced Canadian-made alternatives), or try to protect Canadian workers (who could see reduced hours, pay or job losses in a prolonged trade war)?
Trudeau said Tuesday the government will look, as it did in the 2018 steel-and-aluminum tariff battle with Trump, at applying counter-tariffs on “things that have replacements for Canadian consumers that wouldn’t be tariffed.”
He gave the example of Canadian duties applied to Heinz’s ketchup, but not to French’s ketchup “because French’s was still using Canadian tomatoes” — so that “Canadians don’t bear undue costs around tariffs.”
LeBlanc said the counteroffensive plan is “we would increase the measures over time, so you don’t start at 9.5 out of 10. You start in a proportionate way, and you continue to make the case to the United States that it’s not in their economic interest to continue down this dead-end road.
“And if we’re not getting the traction we want, then you see a second round and a third round and a fourth round.”
Trudeau said again that “everything is on the table,” meaning he has not ruled out leveraging Canadian energy exports in this fight — despite Alberta Premier Danielle Smith’s vehement opposition.
Brian Topp, a New Democrat and a political consultant who sat on the previous NAFTA advisory council and now sits on the 2025 version, said in an interview that the federal government needs to tread carefully. It must ensure supports for workers affected by a trade war, enlist multilateral allies (and not throw Mexico “under the bus”), and be especially careful that it doesn’t harm Canada’s value as a reliable and secure energy supplier to the U.S. Trump, he said, wants energy independence and dominance for the U.S.
“Undermining security of Canadian supply might give this administration, if it’s crudely done, the licence that they need to do what they would need to do to replace our supply relatively quickly,” Topp said.
Trudeau sought to reassure Canadians on Tuesday that his government is ready for every scenario.
“If (the Americans) do move forward with tariffs, our response will be robust and rapid and measured, but very strong,” said Trudeau. “The goal will be to get those tariffs off as quickly as possible.”
And, he added, “we will make sure that no one industry or part of the country is carrying a larger share of the burden of trying to get these tariffs removed than any other region.”
Easier said than done.
