OTTAWA—This is what a trade war looks like. Bitter words. Threats to escalate. And real dollars lost.
U.S. President Donald Trump jolted stock markets Monday by saying he’ll impose 25 per cent tariffs on Canada and Mexico starting at midnight, and threw a new punch by adding that the penalties are related to auto manufacturing “and other things,” not just border security.
“What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” Trump said in the White House.
Asked if there was any room for Canada and Mexico to reach a deal before midnight, when the tariffs take effect after the expiry of a 30-day reprieve, Trump replied, “No room left for Mexico or for Canada. You know, they’re all set. They go into effect tomorrow.”
Trump’s blunt words sent stock markets plunging on both sides of the border, and wreaked havoc on the loonie.
In Toronto, the S&P TSX Composite Index fell 391.88 points, or 1.54 per cent, wiping out more than $60 billion in stock value.
In New York, the broad-based S&P 500 Index fell 104.78 points, or 1.76 per cent, wiping out roughly $880 billion (U.S.) in value.
The Canadian dollar, meanwhile, plunged by almost half a cent (U.S.) to 68.80 cents while Trump was speaking, but recovered a bit and was trading at 69.01 cents by 4:30 p.m.
Ontario Premier Doug Ford, appearing on NBC News after Trump spoke, warned Americans of what’s to come, saying, “It’s going to be an absolute disaster for both countries.”
“Do not let your president do this, or plants will be shutting down within a week.”
Ford reiterated that Ontario will have its own response, which he says would include an end to sales of American wine, spirits and beer, and to exports of nickel to the U.S. He also threatened to halt electricity exports that power homes and manufacturing in New York, Michigan and Minnesota.
“I’m going after absolutely everything, and I don’t want to,” Ford said. “If he wants to destroy our economy and our families, I will shut down the electricity going down to the U.S. And I’m telling you, we will do it.”
“It’s unfortunate. I would rather ship you more electricity, ship you more critical minerals. I want to ship you more energy, more potash to keep your farmers going, and uranium that you use for your nuclear power. It comes through, from Saskatchewan, over to Ontario, and it’s going to be a massive, massive problem.”
Hosting a Taiwanese semiconductor chip executive who promised billions in new investments in the U.S., Trump held that up as an example that his tariff threats are working to drive investment to the U.S. Trump outlined how he will weaponize tariffs against “people” he accuses of taking “advantage of this country. They can’t come in and steal our money and steal our jobs and take our factories and take our businesses and expect not to be punished, and they’re being punished by tariffs.
“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid, or paid off in some other form. And now we’re using them.”
Trump insisted he continues to have concerns about border security, telling reporters “vast amounts of fentanyl have poured into our country from Mexico, and as you know, also from China, where it goes to Mexico and goes to Canada … it comes in from Canada.”
Trump added he would impose reciprocal tariffs on April 2 — a threat he has levied against all America’s trading partners to retaliate for what he has called “unfair trade practices” — but he made clear that the first specific threat against his closest trading allies to the north and south would go ahead immediately.
The 10 per cent tariff he threatened on China would also proceed, and could ramp up depending on “what they do on currency,” Trump said, and on how China retaliates.
Despite dedicating $1.5 billion to new border security plans, and weeks of lobbying in Washington by Canadian cabinet ministers and heads of the RCMP and Canada Border Services Agency, Ottawa had received no formal word about what would happen before Trump spoke at an afternoon event.
After Trump’s public comments, Foreign Affairs Minister Mélanie Joly told reporters, “Let’s be clear, if Trump is imposing tariffs we’re ready.”
Ottawa has prepared a retaliatory package of countermeasures against $155 billion worth of American imports, and Joly said the first tranche of counter-tariffs would be on $30 billion worth of American goods.
“We know that this is an existential threat to us, and there are thousands of jobs in Canada at stake,” she said, speaking ahead of Prime Minister Justin Trudeau’s return to Parliament Hill from London.
Jean Simard, head of the Aluminum Association of Canada, said the threatened tariffs are “a reality” and will immediately start to be felt by the American importers of aluminum.
Applying a 25 per cent tariff on the amount of aluminum that goes into a Ford 150 pickup truck is estimated to increase the cost of that truck by $3,000 (US), Simard said.
Trump has also promised additional 25 per cent sectoral tariffs on steel and aluminum to take effect March 12, which would lead to an effective duty rate of 50 per cent on those products.
Yet Trump appears determined to “somehow” follow through on what he said he wants to do even “at the risk of getting market heat,” Simard said.
Trump watches the markets, but he may also be “testing them” to see how far he can go and for how long, Simard suggested, even as he warned the impact will be felt “within a week” in an industry that operates on a “just-in-time” delivery model.
“We’re not piling up metal. All the metal that is sent to the U.S. is dedicated to land in someone’s backyard to be processed and move further downstream.”
Since Trump’s election in November, markets had already priced in an additional cost for the uncertainty around what Trump would do on steel and aluminum, given that he levied tariffs during his first term (for which Canada got an exemption after reaching a new NAFTA deal with Trump). This tariff will raise it further, Simard said.
Jim Stanford, an economist with the Centre for Future Work, said the tariffs could put hundreds of thousands of Canadians out of work within months.
“This is the most unfathomable, man-made economic disaster we’ve every faced. And there’s no reason for it,” said Stanford.
The impact on the highly-integrated auto industry will be so severe that Stanford suspects there will be enough blowback to cause Trump to back off, at least partly. “I think this will be like when Elon Musk’s DOGE fired all the people who kept an eye on nuclear weapons then realized, ‘Hey, we needed those guys.’”
Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, said predicting the full impact of tariffs is a fool’s errand, especially in the automotive industry.
“It’s impossible to predict the complete impact at this point because this is an unprecedented situation,” said Kingston, but added tariffs would be “very challenging” to deal with.
“You could be looking at production stoppages, of course, and price increases. And that’s just the immediate concern,” said Kingston.
Pedro Antunes, chief economist at the Conference Board of Canada, called the idea of permanent tariffs “unfathomable.” While the economic hit of the global COVID-19 pandemic on Canada might have been devastating, the damage even from temporary tariffs — or the threat of them — could end up being longer-lasting.
“This affects our economic stability, this affects our ability to trade, this affects our ability to attract investment,” said Antunes. “We’re not going to be able to pivot quickly from this.”
The Trump administration is “using uncertainty as a marketing or a bargaining tool,” Immigration Minister Marc Miller said Monday, admitting that Canada can try to diversify trade but “can’t replace an economy that is responsible for 80 per cent of our trade overnight, and it’s going to hurt.”
“My message to Canadians is that we have a higher pain threshold than our partners to the south of us. We can continue to fight. We will have to bring the fight, and it will hurt Americans as well.”
With files from Robert Ferguson
