Discussing the looming trade war and other border concerns
Donald Trump was not bluffing with his tariff threats. On November 25, 2024, American President-elect Trump threatened 25 % tariffs on all products entering the United States (“US”) from Canada and Mexico until both countries take concrete steps to stop the flow of illegal drugs and migrants. His tariffs, however, ignore important realities. Canada and the US share one of the most secure borders in the world. Illegal drug trafficking and migrant crossings from America’s northern neighbor account for only a fraction of those from Mexico and other foreign countries.
In response to President-elect Trump’s threat, Canada unveiled a 1.3 billion dollar border security plan to address the flow of fentanyl in December 2024. Despite this, on February 1, 2025, Trump made true his promise and signed an executive order to slap 25 % tariffs on Canada. Canadian Prime Minister Justin Trudeau promised a 30 billion dollar retaliation package and an additional 125 billion dollar in duties on American products effective in 21 days. The tariff announcements sent the Canadian dollar plummeting to under 68 cents US, its lowest level since 2003. Stocks on Wall Street also took a tumble with the Dow Jones down 122 points or 0.3 %, up from a 1.5 % drop earlier that day.
Trump then reactively delayed the tariffs on Canada and Mexico for an additional 30 days on February 3, 2025, prompting Canada and its provinces to temporarily pause their retaliatory tariffs. Next, in less than a week—on February 10, 2025—Trump backtracked slightly and formally announced, through executive order, 25% tariffs on Canadian steel and aluminum.
Canadian steel and aluminum industries, already battered by Trump’s 2018 tariffs, now face renewed challenges under the latest measures. The 2018 tariffs—25% on steel and 10% on aluminum—were intended to bolster American manufacturing. However, economists estimate that these tariffs cost America approximately 75,000 manufacturing jobs, as higher costs for Canadian steel and aluminum disrupted supply chains and stifled demand throughout North America. Canadian markets suffered as well, with steel and aluminum exports plummeting. Far from strengthening America’s manufacturing base, the tariffs only exposed the cost of protectionism.
Jean Simard, President of the Aluminium Association of Canada, warns that the new aluminum tariffs will disrupt the jobs of 9,500 Canadian workers who produce aluminum that is then exported to the US to be processed by over 500,000 American manufacturing workers.
The automaking industry faces significant disruption as the tariffs threaten to upend highly integrated auto-manufacturing supply chains. With no feasible short-term alternatives to replace the U.S. market, the sector faces mounting pressure. Economists warn that layoffs and rising unemployment will likely proceed. Manufacturing sectors will likely bear the initial brunt of the tariffs before spilling over to hospitality and other service industries. For thousands of workers, the tariffs could mean not just lost wages, but an uncertain future for their families and communities.
For the average Canadian, the impact of Trump’s tariffs will hit close to home. From grocery bills to everyday household expenses, the ripple effects will be felt across the country. The Bank of Montreal forecasts that reduced demand for Canadian goods from the US will force Canadian businesses to raise prices. This would compound on top of the added strain of retaliatory tariffs and supply chain disruptions. As such, Canadians can expect not only higher costs for consumer goods but also a narrower selection on store shelves near them.
Given the strength of the Canada-US border and the immediate economic harm caused by tariffs on Canadian steel and aluminum, questions on what Trump truly wants come into full force. The President has long floated the idea of annexing Canada as the 51st state, an idea met with growing international backlash. However, his rhetoric suggests a more cynical agenda. Some analysts speculate that Trump’s true aim may lie further north in the Canadian Arctic. Rich in natural resources and home to emerging shipping routes due to melting ice caps, the Arctic Circle has become a global focal point, with countries like Russia and China vying for influence over the region. By targeting Canada, Trump may be signalling his intent to leverage economic pressure to secure a foothold in this strategically vital region.As Trump’s tariffs loom large over Canada, the nation’s leaders have come together in a rare but necessary show of solidarity extending beyond political lines. The provinces of Ontario, British Columbia, and Newfoundland and Labrador have taken bold steps to support Ottawa’s strategy, including pulling American liquor from store shelves as a retaliatory measure. The message remains clear. Canada stands strong. We will never be the 51st state.