Canada-U.S. Trade Relations: 25% Tariffs on Canadian Imports Could Come into Effect February 1
The coming few days will determine whether Trump’s tariff tax will prompt negotiations or deepen the divide in bilateral relations between Canada and the U.S.
On his first day back in office, President Donald Trump reiterated his plans to impose a 25% tariff on all imports from Canada and Mexico, effective February 1, 2025. This move is expected to have significant implications for Canada-U.S. trade relations.
The tariffs were first revealed during Trump’s campaign and stated in an official announcement rather than through an executive order.
They were framed as what Trump claimed was an effort to counter illegal immigration and drug trafficking along the U.S. borders.
If enacted, the tariffs would affect billions of dollars in goods traded between the two countries, including automotive parts, machinery, and agricultural products.
The move has drawn sharp criticism from Canada, which has already unveiled a calculated three-stage retaliatory tariff plan targeting critical U.S. industries.
Outgoing Prime Minister Justin Trudeau met last week with Canada’s provincial premiers to discuss the tariff threats. Trudeau stated, “We have to respond to the challenge we’re facing,” adding that the burden must be shared across the country.
“Nothing is off the table,” Trudeau asserted.
Trudeau also announced the formation of a Canada-U.S. relations council in Toronto, which will advise on the economic and political response and include representatives from the auto sector, unions, industry, and agriculture.
“If we need to retaliate, we will do so. And Americans will discover Trump’s tariff tax,” said Foreign Minister Mélanie Joly after meeting with U.S. senators in Washington.
U.S. Customs and Border Protection (CBP) is waiting for further clarification on enforcement before implementing the tariffs at U.S. points of entry.
Last week, Canada unveiled a three-stage retaliatory tariff plan should Trump’s administration proceed with its tariff threats.
The Canadian government’s approach to countering Trump’s tariff tax is structured to escalate in phases and will target critical sectors of the U.S. economy while leaving room for negotiation.
“If the incoming American administration moves forward with tariffs, we will not hesitate to act,” said Trudeau.
Additionally, Joly emphasized that Canada is prepared to respond to U.S. tariffs, stating, “We have a series of measures that are already prepared, certainly, tariffs linked to imports.”
Canada’s potential retaliatory plan is preliminarily phased out as follows:
If the Trump administration does impose tariffs on Canadian imports on February 1, Ottawa’s immediate response would be to impose similar tariffs on high-profile U.S. goods, such as Florida orange juice and Kentucky bourbon. This is meant to generate attention in politically significant states and create economic and political pressure on the U.S.
Following the initial response, Canada would broaden its tariff measures to include products worth approximately CAD $37 billion. This escalation, which would happen after a two-week consultation, would focus on a broader range of U.S. exports in an effort to impact various sectors of the U.S. economy and amplify pressure on policymakers. The specific products in this stage remain under consideration.
As a final measure and after further consultation, Canada could expand its tariff list to include up to CAD $110 billion worth of U.S. goods. This phase would target broader categories of consumer and manufactured goods to exert maximum pressure on the U.S.
The economic consequences of U.S. and Canadian measures are expected to be significant for both nations and for consumers on both sides of the border.
According to the Canadian Chamber of Commerce, Canada’s GDP could shrink by 2.6%, amounting to a CAD $78 billion annual loss, while the U.S. could see a 1.6% reduction, or USD $467 billion.
Consumers would experience the impact in both North American neighbours, with economic losses that could reach$1,900 CAD per Canadian and $1,300 USD per American.
Please reach out to one of our trade professionals to discuss the potential impact of these tariffs on your business.