“We’re going to have to make an adjustment,” says Kichesippi Beer Co. owner Paul Meek in response to tariffs U.S. president Donald Trump imposed on “Liberation Day.”
United States president Donald Trump proudly declared his state of the tariffs address late Wednesday as “Liberation Day”, but for much of the world, it was more like Groundhog Day.
Ever since, there has been more confusion and insecurity everywhere, along with fresh concerns of a potential recession after Trump’s showy display of the retaliatory tariffs set to kick in on Saturday.
With the notable exception of goods covered under the CUSMA trade deal between Canada, the United States, and Mexico, there’s a universal 10 per cent tariff on all goods arriving into the U.S.
Chinese products will be hit with a 34 per cent tariff and those arriving from the European Union will be subject to a 20 per cent tariff.
All of the above sent stock markets into a freefall.
On Thursday, the Toronto Stock Exchange dropped 971 points- or 3.8 per cent- the largest single-day drop since June 2020, in the height of COVID-19 panic.
The Dow Jones Industrial Average plummeted by 1,700 (4.0 per cent), the fifth-biggest single day thrashing in history.
The sell-off continued on Friday.
Canadians appear, at least in the short term, to have been spared the type of additional major blow that hit just about everywhere else.
“We got the best of a bad deal,” said Ontario Premier Doug Ford.
However, the heated battle between Canada and the U.S. over tariffs on cars continues.
What’s the deal with tariffs on Canadian goods?
As Trump spoke about retaliating against America’s “trade enemies,” holding up a chart listing the range of tariff rates against the world, Canada was notably absent.
When a more detailed eight-page list was distributed to the media following Trump’s formal show, Canada and Mexico were not listed on a group that included 78 countries ranging from Algeria (30 per cent) to Malaysia (24 per cent) to Zimbabwe (18 per cent).
That’s because goods previously included in the current CUSMA trade agreement between the U.S., Canada and Mexico are exempt from the new trade regulations.
“It preserved a number of important elements of our (commercial) relationship,” Liberal leader Mark Carney said after meeting with his cabinet Wednesday.
What’s going on with the automobile industry?
Call it Car Wars.
Trump followed through on his previously announced plan to stamp a 25 per cent tariff on all vehicles imported into the U.S.
Evening Update
The long-term goal of that tax is to encourage companies to set up shop in the U.S. to avoid tariffs. While Trump has framed it in simplistic terms – a tax on foreign-based companies – the additional price will be passed on to consumers in the U.S.
That means thousands upon thousands more to purchase new vehicles, a decision that threatens to decimate the auto manufacturing industry on both sides of the American-Canadian border.
Only hours after the Trump show, Windsor-based Stellantis announced that it will be halting production for two weeks, beginning April 7.
“When we heard rumours of potential downtime, the company said there are multiple factors in play,” Unifor Local 444 said in a statement Thursday. “The primary driver behind the final decision being (Wednesday’s) announcement from U.S. president Donald Trump of the U.S. tariffs.”
Stellantis also laid off a total of 900 workers at five U.S. plants Thursday. Its stock price dropped more than seven per cent Thursday morning.
What does that mean for those in the market to buy a car in Ottawa?
Stephan Houle, general sales manager at Sterling Ford on Ogilvie Road, says he hasn’t yet seen a drastic change in buying habits.
“People are talking about it, people are scared about it, but at this point, we’re not seeing a big difference,” he said Friday.
Houle says the industry as a whole has been walking on eggshells for months because of the on-again, off-again tariff talk from Trump.
However, he says there is an intriguing counter-effect when the price of new cars jumps significantly. When that happens — as was the case when supplies dwindled during COVID-19 — the price of used cars also increases. By extension, the value of a trade-in jumps, as well. He also says 90 per cent of new car buyers are on payment plans and may simply extend the plan a few months longer, if necessary.
“If the price of a trade-in is higher, then the price of a (new) vehicle doesn’t seem so high,” Houle said. “It’s all about payments, too. If you were paying $900 a month for a new pickup, you’re still paying $900 a month for a pickup.”
How has the Canadian government responded on the car front?
On Thursday, Carney announced Canada would retaliate by also putting a 25 per cent tariff on vehicles not covered by CUSMA.
Stay tuned. This is where it gets a tad complicated.
The parts involved in the construction of vehicles can cross the borders of Mexico, U.S.A. and Canada several times before they are fully assembled. Under CUSMA, they weren’t taxed.
So, what now?
The White House says that U.S. companies importing vehicles “will be given the opportunity to certify their U.S. content, and systems will be implemented such that the 25 per cent tariff will only apply to the value of their non U.S. content.”
Good luck trying to break all of that down.
Meanwhile, the proceeds from Canada’s 25 per cent tariff on vehicles not covered by CUSMA will go towards workers and businesses directly hurt by the tariffs.
However, Canada will not apply that tax on incoming auto parts for fear of further upsetting the car-building process here.
What about steel, aluminum and energy?
Paul Meek, owner of the Kichesippi Beer Company, was hoping for news that Trump would either eliminate or lower the tariffs the U.S. president previously announced on aluminum. The cans Meek uses for his product currently come from the U.S.
“Unfortunately, this only confirms that it’s going ahead,” he said. “The price on cans is going to have to go up.”
Steel and aluminum arriving into the U.S. will be subject to a 25 per cent surtax and energy crossing the southern border is subject to an additional 10 per cent levy. Canada previously retaliated on that front, too, matching the U.S. fee by charging 25 per cent on steel and aluminum products from south of the border.
Meek says he currently has a six-to-eight week supply of cans in stock. “We’re going to have to reload. We’re going to have to make an adjustment.”
Meanwhile, the tariff on gas and oil and other energy products remains at 10 per cent. There’s also a 10 per cent tariff on potash, which is pivotal to the agriculture industry. When Trump first talked about imposing tariffs on Canada, the number for potash was set at 25 per cent.
The interesting twist is that with oil prices plunging, prices at the pumps have dropped, too.
What are world leaders saying?
Many have been quiet so far, meeting with economic officials to fully understand just how devastating the impact could be.
Some, however, were outspoken after watching stock markets drop dramatically:
“This decision is a catastrophe for the economic world,” said French Prime Minister Francois Bayrou.
European Union Commission Chief Ursula von der Leyen said, “the consequences will be dire for millions of people around the globe.”
Despite Trump’s loud claims that the tariff decisions will foster a new golden age for the U.S., Spanish president Pedro Sanchez predicted it will be the U.S. that feels the most pain.
“It’s just an excuse to punish countries and implement sterile protectionism,” Sanchez said. “The trade war will affect everyone, but it will hit the one imposing it most of all.”
Mike Pence, Trump’s vice president during his first term in office, has labelled Wednesday’s announcement as the “Trump Tariff Tax”, saying it will amount to a $3,500 tax on the average American family.
Have tariffs changed how you shop, run your business, or manage expenses? We want to hear how they’re affecting your daily life. Let us know what’s different in the comments.
