The trade war might be off for now, but make no mistake, experts say: Canada’s economy is firmly in Donald Trump‘s sights.
As he took office for the second time on Monday, the U.S. president directed federal agencies to take a close look at the country’s trade relationships, singling out Canada, Mexico and China for special attention. Still, the across-the-board 25 per cent tariffs on Canadian imports he’d threatened since November apparently didn’t materialize, at least for the moment.
But the reprieve could be short-lived, say business organizations and trade experts.
“It might be a bit of a relief, but we can’t take our eyes off the prize,” said Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, who was in D.C. Tuesday as part of a broad group of Canadian business leaders in town to plead their case to the new administration, along with Canadian politicians.
News that tariffs wouldn’t be immediate lifted the loonie in trading Monday, temporarily pushing it above 70 cents U.S. By 3:30 p.m., the loonie was at 69.93 cents U.S., up 86/100ths of a cent on the day.
Trump, said Holmes, is still clearly gunning to cut down on some of the $600 billion or so of exports Canada sends to our southern neighbours every year, and appears to be looking at the top of the list.
“He really seems focused on the auto sector,” said Holmes, noting that Trump repeatedly paid tribute to American autoworkers in a speech after taking the oath of office.
Trump also made repeated references to the American energy sector, including his vow to “drill, baby, drill,” for oil and natural gas, Holmes noted.
“He’s looking at sectors they have a lot of trade with,” Holmes said.
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. Vehicles and vehicle parts added up to $73.6 billion.
Even the American government’s own trade figures show that the U.S. imports hundreds of billions of dollars of products from Canada. Through the first 11 months of 2024, the U.S. brought in $377.2 billion (U.S.) in Canadian imports. (That’s $542.5 billion Canadian).
The pro-U.S. energy message — combined with the threat of a close look at trading partners — wasn’t lost on Lisa Baiton, president of the Canadian Association of Petroleum Producers.
“We’ve been working very hard to ensure that … if there is a full review of the Canada-U.S. trade relationship, that it will become clear that the North American energy partnership that was built up over the last century and a half is incredibly beneficial to both our countries,” said Baiton.
The head of Canada’s largest private sector union said the decision to not impose tariffs on Day 1 is a negotiating ploy by the incoming administration.
“This is an attempt to demobilize our efforts in Canada. My message to politicians? Don’t fall for it,” said Lana Payne, president of Unifor. “Whether we get the tariffs today or the continue threat of tariffs, Canada can’t breathe easy.”
The auto industry is so integrated on both sides of the border that tariffs would be catastrophic, Payne said.
“It would mean an impact on jobs for both Canadian and American workers, given how interconnected the industry is,” Payne said.
While avoiding the Day 1 imposition of 25 per cent tariffs is a positive, it shouldn’t provide too much consolation, warned Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association. A less rash approach by Trump could be even more threatening to Canada’s economy in the long run, Volpe said.
“I’ll give them a nod of respect for putting down the heavy artillery, but we’re all vulnerable. We’re more vulnerable if he takes a sophisticated approach,” said Volpe.
Under Section 232 of the Trade Expansion Act, Trump — or any government agency — has the authority to ask the U.S. Department of Commerce to investigate the effect of particular imports on U.S. national security. That’s just what he did during his first term in office, Volpe said, resulting in tariffs on Canadian steel and aluminum imports.
While the Department of Commerce has up to 270 days to complete an investigation, the experience from the first Trump administration shows the results can come more quickly, Volpe said.
“They can come back any time inside that 270 days,” said Volpe.
Trade lawyer John Boscariol agreed that tariffs are still a realistic threat within the short to medium term.
“Clearly, Canada is still a target,” said Boscariol, who leads the international trade practice at McCarthy Tetrault. “In the next few weeks or months, I think there will still be tariffs of some kind. This isn’t going to be the kind of thing that takes 18 to 24 months.”
There might be a bit of breathing room now, but it’s not a time for Canadian business leaders or politicians to sit back and relax, argued Dennis Darby, president and CEO of Canadian Manufacturers and Exporters.
“We’re less worried that it’s going to be done hastily. But … we’re going to have to be really sharp,” said Darby from D.C.
Convincing the U.S. administration that it’s in their country’s economic interest to co-operate with Canada is the top goal, Darby said.
“We’ve got a bit of time to make that case,” said Darby, adding that some items cross the Canada-U.S. border several times en route to becoming a finished product, particularly in manufactured goods.
“A part could be produced in Guelph, painted in Indiana, then assembled in Woodbridge. It’s not just the automotive sector, either. It’s everything,” said Darby. “We have to show them that these kinds of integrated supply chains are good for the U.S. economy, too.”
