Key Facts
- While speaking to reporters in the Oval Office on Thursday night, Trump said he is proceeding with 25% tariffs against Canada and Mexico this Saturday, February 1st.
- Trump demurred on whether oil would be included in his tariffs.
- On Thursday night, the Wall Street Journal reported that White House officials were urgently seeking an offramp from Trump’s threat. They are floating the idea of limited tariffs, or a grace period that allows Canada and Mexico to meet Trump’s demands.
- If new tariffs are released on Saturday, Canada is expected to announce countervailing duties immediately. There will be a short consultation period led by Finance Canada before implementation.
- Rumors are circulating in Ottawa and Queen’s Park that major economic relief packages are being considered to respond to a worst-case scenario. These packages could include support for impacted workers and businesses, as well as investments to prop up the economy during a period of prolonged trade war.
- Ahead of any legislative relief measures, the Bank of Canada has a variety of powerful tools at its disposal to stabilize Canadian markets. Unlike the COVID era, the BoC will be sensitive to measures that could spike inflation above the 2% target.
On Thursday, US President Donald Trump stated that a 25% tariff is coming against Canada and Mexico this weekend. He cited illegal immigration, fentanyl smuggling, and trade deficits as the reasoning behind the move. Trump said that he had not made up his mind on whether Canadian oil would be subject to tariffs.
Canadian officials have previously said that they would immediately respond to any new tariffs with their own set of trade measures.
Canadian political leaders and at least one banking executive have begun talking publicly about what a domestic recovery package could look like if tariffs have severe impacts on the economy. Any new spending initiatives or major adjustments to existing programs would require Parliament to return. The procedure would require all-party support to rush through legislation. It is unclear if such a consensus is possible at this moment.
Below is a rough transcript of last night’s exchange in the Oval Office:
Reporter: Mr. President, on a slightly different subject on your Canada and Mexico tariffs, will oil be included or excluded from those tariffs?
Trump: We’ll be announcing the tariffs on Canada and Mexico for a number of reasons. Number one is the people that have poured into our country so horribly and so much. Number two are the drugs fentanyl and everything else that have come into the country. And number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of deficits. I’ll be putting the Tariff of 25% on Canada and separately 25% on Mexico. We will really have to do that because we have very big deficits with those countries those tariffs may or may not rise with time. Oil is going to have nothing to do with it as far as I’m concerned oil has nothing to do with it.
Reporter: What about tariffs on Canada and Mexico?
Trump: That’s coming on Saturday that’s coming on the 1st, Saturday.
Reporter: But no oil tariff? On oil tariffs?
Trump: No, I don’t… well I didn’t say that you said that. No, we may or may not. We’re going to make that determination probably tonight on oil. Yeah, because they send us oil. We’ll see, it depends on what the price is if the oil is. Properly priced if they treat us properly, which they don’t. Look, Mexico and Canada have never been good to us on trade.
They’ve treated us very unfairly on trade and we will be able to make that up very quickly because we don’t need the products that they have. We have all the oil you need. We have all the trees you need, meaning the lumber – we have more than almost anybody in those two categories. In oil we have more than anybody and we don’t need anybody’s trees. We have to free up some of the some of the tree areas that we have. We have great lumber in this country, we have to free them up environmentally which I can do very quickly, but we don’t need what they have. And for us to be subsidizing Canada to the tune of 175 billion dollars a year, and subsidizing Mexico to the tune of 250 billion 300 billion dollars a year.
And Mexico is a method of China sending in its product, and with China I’m also thinking about something because they’re sending fentanyl into our country and because of that they’re causing us hundreds of thousands of deaths. So, China is going to end up paying a tariff also for that, and we’re in the process of doing that. We’ll make that determination what it’s going to be, but China has to stop sending fentanyl into our country and killing our people.
