United States President Donald Trump has been true to his threats.
On Tuesday, the Trump administration unleashed 25 percent blanket tariffs on Canadian imports, excluding energy, which was hit with 10 percent.
Trump also slapped a 25 percent tariff on Mexico, and doubled China’s tariffs to 20 percent.
Royal Bank of Canada economists Francis Donald and Cynthia Leach have called this the largest trade shock to Canada in nearly a hundred years.
Vina Nadjibulla, vice president of research and strategy at the Asia Pacific Foundation of Canada, referred to the tariffs as an “existential fight” for Canada.
Whatever the impact, economist all agree that a trade war between the US and Canada has begun.
Canada announced 25 percent tariffs on 30 billion Canadian dollars ($21bn) worth of US imports in retaliation, and has said it will target another 125 billion Canadian dollars ($87bn) in goods in 21 days if needed.
Mexico has promised to retaliate but has held off on any action until Sunday.
China has announced the imposition of tariffs of 10 to 15 percent on certain US imports from March 10, and has also laid out a series of new export restrictions for designated US entities.
It has also filed a complaint with the World Trade Organization on Tuesday’s actions.
Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said the length of the tariff war remains “in the court of the US”.
But even if the blanket tariffs are revoked, more tailored tariffs are likely to persist and, in turn, cause inflation, which will hurt the economies of all the countries involved, Ziemba said.
“The economic impact will be significant on all sides as prices and inflation increase and businesses struggle to plan not just among these tariffs but also with other tariffs set to come,” Ziemba told Al Jazeera, referring to Trump’s promise to impose reciprocal tariffs on all countries that apply levies to US products.
“It’s very hard to say where this is headed,” Brett House, a professor at Columbia Business School, told Al Jazeera.
“There will be more tariffs on more countries before we see any rollback,” House said, adding, “The Trump White House moves capriciously and changes its mind” frequently.
House said that while negotiations are possible, Trump’s stated reasons for slapping tariffs on Canada – to force it to stem the flow of undocumented migrants and fentanyl into the US – was based on “absolutely false” data and, in fact, unauthorised migrants, guns and drugs have been increasingly moving in the opposite direction.
Last month, Canada’s CBC News reported that new data from the Canada Border Services Agency (CBSA) showed that there has been a growing influx of illegal US drugs and guns in the last couple of years. Drug hauls, for instance, soared from 3.8 million grams (600 stone) to 8.3 million grams (1,307 stone) in 2024 – a greater quantity than seized by their counterparts on the US side of the border.
A ‘profound shift’
So, while everything is negotiable, Trump usually responds either to flattery or force, House said, and Canada has already tried flattery.
“The Prime Minister’s office is now rightly shifting to force,” House said.
Apart from its tariffs announced so far, Canada is also considering imposing tariffs on electricity exports to the US.
More importantly, the situation has brought into sharp focus a question that has gathered steam in the face of threats by Ottawa’s closest ally: What is the future of the Canada-US relationship?
Some Canadian estimates have suggested Trump’s tariffs could cost as many as 1.5 million jobs and send the economy into a recession.
Canadian Prime Minister Justin Trudeau on Tuesday said that Trump was planning to cause the “total collapse of the Canadian economy because that will make it easier to annex us”.
“This is not just about tariffs. The most unsettling and profound shift that we’re witnessing now is in the relationship between Canada and the US,” Nadjibulla, the vice president of research and strategy at the Asia Pacific Foundation of Canada, told Al Jazeera.
“This is an existential fight and will require leadership from all the provinces and all the parties because no one knows what tomorrow holds.”
Nadjibulla said it was unclear if the current tensions would be limited to trade or bleed into other areas such as foreign policy and defence and security arrangements.
Even if there is a de-escalation between the two countries, she added, “there’s now a complete shift in paradigm” in how to view the relationship between the US and its traditional allies.
“It’s clear we need to make our own national resilience … and need to make ourselves more capable for trading and working with others across the world,” she said. “It’s a wake-up call for Canada.”
But it is a wake-up call for Mexico as well, as some Canadian premiers have suggested that Canada work out its own trade deal with the US to replace the US-Mexico-Canada Agreement.
“There is strength in numbers,” House said, and the “strategy of any bully like the US president is to divide and ensure his counterparts are negotiating individually”.
House warned that Ottawa’s relationship with Mexico could be damaged by suggestions that Canada leave Mexico out of a future trade deal, which fits Trump’s strategy of separating parties so they don’t negotiate from a position of solidarity.
On Tuesday, US Commerce Secretary Howard Lutnick told Fox Business that Trump will reach a middle ground with Canada and Mexico on tariffs and an announcement to that effect is expected on Wednesday.
Whatever compromise is reached, it will not fully repair the damage done to the relationship between the North American trade partners, Ziemba said, especially as other tariffs on specific sectors are expected down the road.
That said, “the cost of a trade war is great and a truce is possible”, Ziemba said.
Until then, as they say in Canada when a fight is about to break out during ice hockey, it is elbows up.
