It might have been an off-the-cuff remark during an Oval Office photo opp, but Donald Trump’s “thinking” of launching 25 per cent tariffs on Canadian imports on Feb. 1 should still be taken seriously, Canadian business leaders and trade experts warn.
Trump’s late-evening musing on Monday, just hours after his inauguration, could possibly spell trouble for Canada’s dairy, aluminum and steel industries, experts say — even Canadian oil and gas might not be immune. Then again, they might be.
The uncertainty is part of Trump’s point, said Matthew Holmes, public policy chief at the Canadian Chamber of Commerce.
“We don’t know if it’s going to be widespread or targeted. We don’t know if it’s going to be 25 per cent. And we don’t know if it’s going to actually take effect on Feb. 1, or just be announced then,” said Holmes.
Still, just because there’s doubt about the form or timing, doesn’t mean the threats shouldn’t be taken seriously, Holmes argued.
“If Trump thinks he’s not being taken seriously, we’ve seen before he’ll double down,” Holmes said.
Broad-based tariffs — which CIBC estimated Tuesday could shave three per cent off of Canada’s economy even if oil and gas are excluded — are unlikely, at least in the short term, said trade lawyer John Boscariol.
“I don’t think it’s going to be 25 per cent tariffs across the board, but I think there’s a real risk there could be targeted measures put in place to move things along,” said Boscariol, head of the international trade practice at Toronto’s McCarthy Tetrault law firm.
While Trump signed an executive order requiring his secretary of commerce to report on U.S. trade relationships by April 1, Boscariol said there could well be tariffs imposed before then, and suggested looking to Trump’s first term in office for potential targets.
“I think you first look back to 2018 and what he was going to do in 2020, and that first started with steel and aluminum products, so that’s potentially at risk now,” said Boscariol, adding that Canada’s supply-managed dairy sector could also be at risk.
“Even though it’s probably pretty small economically, it’s a high-profile item and Trump is constantly complaining about Canada’s supply management system,” said Boscariol. “I think it would be a high-profile hit for him.”
The Dairy Farmers of Ontario declined a request for comment. The Dairy Farmers of Canada didn’t respond to a request for comment.
The head of the Aluminium Association of Canada said his members are already bracing for the worst, noting that 90 per cent of Canadian aluminum produced every year goes to the U.S.
“They’re very nervous. We’ve been down this road before,” said AAC president Jean Simard of the potential for his members to be hit as soon as Feb. 1.
Still, said Simard, if economic self-interest is Trump’s motivation, the U.S. president shouldn’t impose tariffs on Canadian aluminum.
“They still need that metal,” said Simard.
The U.S. only produces about 700,000 tonnes of the 5 million tonnes of aluminum it consumes each year, Simard said, with Canada sending our southern neighbours 3.2 million tonnes.
Even if Trump wanted to start producing more, it would cost $80 billion (U.S.) to set up enough new smelting plants to replace the Canadian metal, Simard estimated.
And the U.S. would also need to produce more electricity to run those plants, adding even more money to the tally.
“It makes more sense to create power to back up data centres,” said Simard, “not to produce metal that’s already being supplied by their neighbour.”
On Monday, Trump also declared a national energy emergency, and promised to “drill, baby, drill.”
That, said oil industry analyst Andrew O’Conor, could mean tariffs are on the way for Canada’s oil and gas industry.
“I don’t see anything where he’s ruling out oil and gas tariffs,” said O’Conor, vice president of corporate ratings for energy and natural resources at Morningstar DBRS.
Even if Trump’s long-term goal is for the U.S. to rely less on imported oil, tariffs on Canadian crude would hurt American consumers in the short-run, O’Conor said.
“Our assumption is that this will raise pump prices,” said O’Conor. “The U.S. imports four million barrels of oil per day from Canada.”
In 2023, the most recent year for which annual data is available, Canadian exports to the U.S. totalled $594.5 billion (Canadian), according to official statistics from the federal ministry for Innovation, Science and Economic Development.
In top spot at $130.3 billion? Crude oil. Other petroleum products being shipped to our southern neighbour added up to another $36.6 billion.
The president of the Canadian Association of Petroleum Producers said both countries need each other’s oil and gas.
“In a world where we’re seeing a massive appetite for energy, together, our two countries have the potential to have the most powerful energy alliance on the planet,” said CAPP president Lisa Baiton. “And we should be doing everything in our power to preserve and protect that century-and-a-half, long-standing energy partnership.”
