The new trade tensions between Canada and the United States are a reminder of just how fragile the economic relationship between the two countries is. With Donald Trump’s new US tariffs coming into force, Canada is fighting back, seeking to minimise the impact on its businesses and citizens. But what do these measures really mean for the future of Canadian trade?
I - A brutal trade shock
From 4 February 2025, all Canadian products (except energy resources) will be subject to a 25% tariff in the United States. Energy will be subject to a 10% tax. Justified by the fight against illegal immigration and fentanyl trafficking, President Trump’s decision is based on the International Emergency Economic Powers Act.
In response to this situation, Canada has announced a series of counter-tariffs that will gradually affect $155 billion worth of American goods. Initially, a first wave of $30 billion of US imports will be taxed at 25%, targeting consumer products such as poultry, dairy products, sugar, wine, cosmetics and even tyres. Then, three weeks later, a second wave of $125 billion will target cars, steel and aluminium products, beef and aerospace products.
II - A measured but firm response
The Trudeau government, supported by the provinces and local industries, is adopting a progressive strategy. This approach is designed to give Canadian companies time to reorganise their supply chains and find viable alternatives. However, in addition to taxes, Ottawa is also considering non-tariff countermeasures, including restrictions on the export of strategic resources.
Canadian economic players are also worried. On the one hand, the Canadian Chamber of Commerce is warning of an inevitable rise in costs for families and businesses. Unifor, the largest private sector union, is calling for a more aggressive response. Finally, the Canadian Labour Congress is even proposing to go as far as suspending exports of oil and critical minerals to the United States.
III - A commercial relationship at risk
In 2023, trade between the two countries reached more than $1300 billion, and every day around $3.5 billion worth of goods and services cross the border. These figures illustrate the crucial importance of this economic relationship. However, the recent escalation of customs duties threatens to disrupt this constant flow of trade. Faced with this uncertainty, Canadian companies are being forced to rethink their strategy to reduce their dependence on the US market. In particular, they are considering diversifying their trading partners, exploring new international markets and strengthening local production. In short, this section highlights the fragility of a vital trading relationship and the urgent need for Canada to adapt in order to preserve the stability of its economy.
While US policy remains unpredictable, Canada needs to adapt quickly. The government could strengthen its ties with Europe and Asia to offset its dependence on the United States. Agreements such as CETA (with the European Union) and CPTPP (with Asia-Pacific) are becoming more strategic than ever.
In these uncertain times, one thing is certain: Canada is not giving in. By playing the resilience and diversification card, it could turn this crisis into an opportunity to assert its commercial independence. The future of Canadian trade will depend on its ability to adapt to the new rules of the international game.
Don’t hesitate to subscribe to the Transfergratis blog for the latest news.
