Trump’s ‘Tariff Thrashing’ Spurs Crisis Response From Canada
Christine Dobby and Randy Thanthong-Knight
Sun, February 2, 2025
(Bloomberg) -- Canadian government officials and business leaders mounted a crisis response that drew parallels with the Covid pandemic after President Donald Trump signed an order to put 25% tariffs on almost everything the US buys from Canada.
Officials arranged a meeting with the chief executive officers of Canada’s major banks and the governor of the Bank of Canada, Finance Minister Dominic LeBlanc said Sunday. The head of Canada’s bank regulator was also invited to join the call, according to a person with knowledge of the situation who asked not to be named discussing confidential matters.
The meeting was expected to discuss possible government aid and regulatory responses, such as changes in bank capital rules, to support Canadian businesses, the person said. Similar meetings were common as the Covid crisis unfolded in early 2020. At that time, bank capital rules were relaxed to allow more lending to help the economy.
Government leaders in Canada also announced more retaliatory measures against the US. Several provinces, including Ontario and Quebec, will remove US products from liquor stores they control. In Ottawa, government staff gave more details on how Canada will bring in 25% counter-tariffs against more than 1,200 categories of US products within days.
One government official, speaking on condition they not be named, said they believed Trump’s move is a clear violation of the US-Mexico-Canada trade deal that he signed in 2020, and that Canada is considering its legal options.
The US tariffs — which also include 10% levies on Canadian oil and gas — are expected to create job losses in Canada and may even cause it to tip into a recession if they last for a number of months, according to economists. Ontario and Quebec, the two most populous provinces and the home of the country’s automotive and aerospace industries, look particularly vulnerable.
“Canada feels betrayed. Violated. Punched by its big brother for no damn good reason,” Bank of Nova Scotia economist Derek Holt wrote in a report titled “The Saturday Night Tariff Thrashing.” Relations between the two longtime allies have “sharply deteriorated in breathtaking fashion that I certainly haven’t seen in my life or 30-year career,” he said.
Trump’s executive orders putting tariffs on Canada, Mexico and China are intended to address what he calls a “threat to the safety and security of Americans, including the public health crisis of deaths due to the use of fentanyl.”
Canadian officials have countered by pointing to US data that suggests Canada is only a very minor source of the fentanyl that’s making it into the US, and saying they’re taking strong measures to crack down on the drug.
Motorcyles and Makeup
The initial phase of Canadian counter-tariffs comes into effect Tuesday and will place 25% levies on C$30 billion ($20.4 billion) in American-made goods — including alcoholic beverages, cigarettes, coffee, diamond rings, motorcycles and makeup. The products were selected to create difficulties for US exporters while minimizing disruption for Canadian shoppers, as there are non-US sources for those things.
In three weeks, Canada plans to place tariffs on an additional C$125 billion of US-made items, including cars and trucks, unless there’s a resolution.
LeBlanc said he thought it was unlikely the trade war would be solved immediately.
“I’m very pessimistic that by Tuesday we can get out,” he said on CTV News, noting that he spoke with Howard Lutnick, Trump’s nominee for commerce secretary, a day earlier. “My conversations with Howard Lutnick and others in the administration tell me that perhaps in March there’s a window again. But most of this is so unpredictable. Our job is to be ready for what Mr. Trump did yesterday. We were ready.”
Many Canadians reacted to the rupture in relations with the country’s closest ally with anger and dismay, from hockey fans in Ottawa booing the Star-Spangled Banner, to lists circulating on social media of how to “Buy Canada” at the grocery store.
Canada’s former finance minister called Trump’s tariff action “utter madness” in a CNN interview. “It is a betrayal of America’s closest friend, of your ally, your neighbor, your best partner in the whole world,” said Chrystia Freeland, who is now running to replace Justin Trudeau as leader of the Liberal Party and prime minister. Trudeau will leave office next month.
Freeland and four other candidates in the Liberal leadership race, including former Bank of Canada Governor Mark Carney, issued a joint statement calling the US tariff decision “an assault on our countries’ long-standing economic partnership.”
Business organizations from across the country and lobby groups for industries including aluminum, beef, forest products and canola condemned the tariffs. The US aluminum industry also called on Trump to exempt Canadian imports of the raw metal to help protect American jobs and domestic manufacturers.
Phillip Magness, senior research fellow at the Independent Institute, a California-based policy research group, highlighted the historic nature of Trump’s sweeping tariff actions. The closest parallel, he said, is the Smoot-Hawley Tariff Act of 1930, when Congress attempted to protect the American economy in the early days of the Great Depression and raised tariff rates to 59% on average.
“Rather than serving as this counter-recessionary stimulus package that it was pitched as, it ended up igniting an international trade war very similar to what we’re actually seeing unfold today,” Magness said in an interview.
“It collapsed the international exports market out of the US as well as imports coming in, and plunged us into a complete collapse of the global trading system within about four years.”
--With assistance from Laura Dhillon Kane, Brian Platt and Melissa Shin.
Most Read from Bloomberg Businessweek
Christine Dobby and Randy Thanthong-Knight
Sun, February 2, 2025
(Bloomberg) -- Canadian government officials and business leaders mounted a crisis response that drew parallels with the Covid pandemic after President Donald Trump signed an order to put 25% tariffs on almost everything the US buys from Canada.
Officials arranged a meeting with the chief executive officers of Canada’s major banks and the governor of the Bank of Canada, Finance Minister Dominic LeBlanc said Sunday. The head of Canada’s bank regulator was also invited to join the call, according to a person with knowledge of the situation who asked not to be named discussing confidential matters.
The meeting was expected to discuss possible government aid and regulatory responses, such as changes in bank capital rules, to support Canadian businesses, the person said. Similar meetings were common as the Covid crisis unfolded in early 2020. At that time, bank capital rules were relaxed to allow more lending to help the economy.
Government leaders in Canada also announced more retaliatory measures against the US. Several provinces, including Ontario and Quebec, will remove US products from liquor stores they control. In Ottawa, government staff gave more details on how Canada will bring in 25% counter-tariffs against more than 1,200 categories of US products within days.
One government official, speaking on condition they not be named, said they believed Trump’s move is a clear violation of the US-Mexico-Canada trade deal that he signed in 2020, and that Canada is considering its legal options.
The US tariffs — which also include 10% levies on Canadian oil and gas — are expected to create job losses in Canada and may even cause it to tip into a recession if they last for a number of months, according to economists. Ontario and Quebec, the two most populous provinces and the home of the country’s automotive and aerospace industries, look particularly vulnerable.
“Canada feels betrayed. Violated. Punched by its big brother for no damn good reason,” Bank of Nova Scotia economist Derek Holt wrote in a report titled “The Saturday Night Tariff Thrashing.” Relations between the two longtime allies have “sharply deteriorated in breathtaking fashion that I certainly haven’t seen in my life or 30-year career,” he said.
Trump’s executive orders putting tariffs on Canada, Mexico and China are intended to address what he calls a “threat to the safety and security of Americans, including the public health crisis of deaths due to the use of fentanyl.”
Canadian officials have countered by pointing to US data that suggests Canada is only a very minor source of the fentanyl that’s making it into the US, and saying they’re taking strong measures to crack down on the drug.
Motorcyles and Makeup
The initial phase of Canadian counter-tariffs comes into effect Tuesday and will place 25% levies on C$30 billion ($20.4 billion) in American-made goods — including alcoholic beverages, cigarettes, coffee, diamond rings, motorcycles and makeup. The products were selected to create difficulties for US exporters while minimizing disruption for Canadian shoppers, as there are non-US sources for those things.
In three weeks, Canada plans to place tariffs on an additional C$125 billion of US-made items, including cars and trucks, unless there’s a resolution.
LeBlanc said he thought it was unlikely the trade war would be solved immediately.
“I’m very pessimistic that by Tuesday we can get out,” he said on CTV News, noting that he spoke with Howard Lutnick, Trump’s nominee for commerce secretary, a day earlier. “My conversations with Howard Lutnick and others in the administration tell me that perhaps in March there’s a window again. But most of this is so unpredictable. Our job is to be ready for what Mr. Trump did yesterday. We were ready.”
Many Canadians reacted to the rupture in relations with the country’s closest ally with anger and dismay, from hockey fans in Ottawa booing the Star-Spangled Banner, to lists circulating on social media of how to “Buy Canada” at the grocery store.
Canada’s former finance minister called Trump’s tariff action “utter madness” in a CNN interview. “It is a betrayal of America’s closest friend, of your ally, your neighbor, your best partner in the whole world,” said Chrystia Freeland, who is now running to replace Justin Trudeau as leader of the Liberal Party and prime minister. Trudeau will leave office next month.
Freeland and four other candidates in the Liberal leadership race, including former Bank of Canada Governor Mark Carney, issued a joint statement calling the US tariff decision “an assault on our countries’ long-standing economic partnership.”
Business organizations from across the country and lobby groups for industries including aluminum, beef, forest products and canola condemned the tariffs. The US aluminum industry also called on Trump to exempt Canadian imports of the raw metal to help protect American jobs and domestic manufacturers.
Phillip Magness, senior research fellow at the Independent Institute, a California-based policy research group, highlighted the historic nature of Trump’s sweeping tariff actions. The closest parallel, he said, is the Smoot-Hawley Tariff Act of 1930, when Congress attempted to protect the American economy in the early days of the Great Depression and raised tariff rates to 59% on average.
“Rather than serving as this counter-recessionary stimulus package that it was pitched as, it ended up igniting an international trade war very similar to what we’re actually seeing unfold today,” Magness said in an interview.
“It collapsed the international exports market out of the US as well as imports coming in, and plunged us into a complete collapse of the global trading system within about four years.”
--With assistance from Laura Dhillon Kane, Brian Platt and Melissa Shin.
Most Read from Bloomberg Businessweek
Yongchang Chin
Updated Sun, February 2, 2025
(Bloomberg) — Oil surged as President Donald Trump placed hefty tariffs on a range of imports including crude from Canada and Mexico, threatening higher costs for consumers.
West Texas Intermediate (CL=F), the US benchmark, rose as much as 3.7% to $75.18 a barrel, while Brent crude’s (BZ=F) gains were less pronounced, to near $76. Trump carried out his threat to impose general levies of 25% on Canada and Mexico and 10% on Chinese goods starting on Tuesday, sparking pledges of retaliation and leaving only a small window for last-minute negotiation.
Energy from Canada faces a reduced levy of 10%, which includes roughly 4 million barrels a day of crude. The US gets most of its oil imports from its northern neighbor — as well as about 500,000 barrels from Mexico. The increased cost for feedstock will likely translate to surging prices at the pump, with the most-active gasoline futures soaring as much as 5% in New York.
Crude had fallen since Trump’s inauguration, with the new administration’s policies threatening to disrupt global trade and growth, but still notched a modest advance last month after gains from a cold winter and US sanctions on Russian oil. Trump also flagged even wider tariffs in the coming months, including against the European Union
“Tariffs on the US’ largest crude oil supplier are providing a boost to crude oil prices and in particular refined product prices,” said Warren Patterson, head of commodities strategy for ING Groep NV. “While this may be supportive in the very short term, we may not need to wait too long for a risk-off move as it raises concerns over global growth.”
The potential disruption to US oil supply saw the discount of WTI to global benchmark Brent narrow to around $3 a barrel from a low of nearly $4 last month. Traded volumes were also far above average levels in the Asian session, with about 200,000 lots of WTI across the curve trading in the first hour, or almost a fifth of Friday’s total.
Energy from Canada faces a reduced levy of 10%, which includes roughly 4 million barrels a day of crude. The US gets most of its oil imports from its northern neighbor — as well as about 500,000 barrels from Mexico. The increased cost for feedstock will likely translate to surging prices at the pump, with the most-active gasoline futures soaring as much as 5% in New York.
Crude had fallen since Trump’s inauguration, with the new administration’s policies threatening to disrupt global trade and growth, but still notched a modest advance last month after gains from a cold winter and US sanctions on Russian oil. Trump also flagged even wider tariffs in the coming months, including against the European Union
“Tariffs on the US’ largest crude oil supplier are providing a boost to crude oil prices and in particular refined product prices,” said Warren Patterson, head of commodities strategy for ING Groep NV. “While this may be supportive in the very short term, we may not need to wait too long for a risk-off move as it raises concerns over global growth.”
The potential disruption to US oil supply saw the discount of WTI to global benchmark Brent narrow to around $3 a barrel from a low of nearly $4 last month. Traded volumes were also far above average levels in the Asian session, with about 200,000 lots of WTI across the curve trading in the first hour, or almost a fifth of Friday’s total.
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