Tariffs Against Canada

 

March 16, 2025

The United States's tariff policy is now focused on dealing with its yearly deficit in federal spending. The US is in trouble with its annual budget. It had a disastrous federal shortfall of $1.83 trillion in fiscal 2024.

Trump is responding in several ways. The first is a significant budget Bill that calls for trillions of dollars in spending and tax cuts, which must not deepen the deficit while keeping tax levels low.

The next is internal efficiencies found through Elon Musk's Department of Government Efficiency. Finally, tariffs are a revenue source and an incentive to reposition investment into the United States.

The plan is to impose tariffs on countries worldwide. The countries that submit to the US may be able to mitigate tariffs in exchange for US advantages.

As a direct response to Trump's actions, Canada has retaliated by applying a 25% tariff to some $60 billion worth of American goods entering Canada. This tit-for-tat escalation is a clear sign of deteriorating US-Canada relations. If the US continues its aggressive policies towards Canada, more Canadian tariffs are on the horizon, further straining the relationship.

To help politically with the American voter, Trump has been ‘trash-talking’ against Canada to justify his economic aggression.

Here is a fact check of Trump’s false statements, a crucial exercise in the current political climate to keep the public informed and empowered. 

Canadians' views on becoming the 51st state: In January, Trump falsely claimed to reporters that the people of Canada liked his idea of Canada joining the US. In fact, all polls show the idea is massively unpopular with Canadians. All Canadian political leaders have vehemently rejected the notion. The nation felt insulted and betrayed by its friend.

The US trade deficit with Canada: Trump has repeatedly said the US has a $200 billion trade deficit with Canada. That is false. Canada is the USA's best international customer. Take Canadian oil out of the equation, and Canada has a trade deficit, and the US has a surplus of $58 billion. Canada also subsidizes the US, as the US does not pay the world price for Canadian oil but gets an insider deal. The US must import oil to meet its needs.

Canada’s tariffs: Trump falsely claimed that Canada is among the highest-tariffing nations worldwide. In fact, Canada has relatively low tariffs, though it has now announced new retaliatory tariffs in response to Trump's tariffs on Canada. Canada was just 102nd-highest on a World Bank list of 137 countries' trade-weighted average tariff rates in 2022 – and had a lower average (1.37%) than the United States (1.49%).

Canada's dairy tariffs: Trump falsely claimed that Canada's dairy tariff situation was well handled when he left office the first time, but they kept raising it under Biden. In fact, Canada did not raise its dairy tariffs during the Biden administration. The tariffs Trump is denouncing were left in place by the US- Mexico- Canada Agreement that Trump signed in 2018, though that agreement secured greater US access to the Canadian dairy market, which they have not filled. The US dairy industry is also highly subsidized.

Trump also fails to mention that Canada's high dairy tariffs only apply after the US has hit a certain Trump-negotiated quantity of tariff-free dairy sales to Canada. The US is not hitting its zero-tariff maximum in any category of dairy sales in Canada, so tariffs aren’t being applied.

Canada’s imports of US agricultural products: Trump claimed that Canada doesn’t sufficiently import US agricultural products. This is false. According to the US Department of Agriculture, Canada was the world's second-largest buyer of US agricultural exports in 2024, purchasing about $28.4 billion.

While Canada does limit foreign access to its dairy, egg, and poultry markets, these are exceptions rather than the rule. This is done to prevent dumping and boom-and-bust cycles. It also supports family-sized farms against large corporate takeovers. On its website, the US Department of Agriculture notes that almost all US agricultural exports to Canada face zero tariffs or quotas. Canada consistently ranks among the top markets for US agricultural product exports, representing one of the most significant and reliable trading partners.

Canada and US banks: Trump falsely claimed Canada prohibits US banks. While Canada's high-quality regulations have discouraged some foreign banks from opening retail branches, Canada does not forbid these banks, as US banks have been operating in Canada for over a century. The Canadian Bankers Association industry group says, "There are 16 U.S.-based bank subsidiaries and branches with around C$113 billion in assets currently operating in Canada and that U.S. banks now make up approximately half of all foreign bank assets in Canada."

Canada, Russia, and China: Trump falsely claimed that Canada joining the US would secure Canada "from the threat of the Russian and Chinese Ships that are constantly surrounding them."  Canada has never been surrounded by Russian and Chinese ships. A few Russian and Chinese military ships and jets, as well as Chinese research vessels, were viewed with suspicion by Canada and the US and have been occasionally spotted in recent years in the vicinity of Alaska – and have been monitored or intercepted by both the Canadian and US militaries in coordinated protection.

The Canadian government has warned that among the potential threats in its Arctic, was increased Russian activity and Canadian air approaches, and China’s regular deployment of dual-use research and military application vessels as surveillance platforms to collect data. Canada was never surrounded. Canada is strongly investing in northern protection.

Trudeau and the trade war: Trump falsely said in a social media post: “I think that Justin Trudeau is using the Tariff problem, which he has largely caused, to run again for Prime Minister.”  Trudeau’s successor as Liberal Party leader and Prime Minister has been installed according to the Canadian plan. Mark Carney is now Canada's Prime Minister and will soon call a national election.

Canada's defense spending: Trump falsely claimed that Canada spends "less than 1%" of GDP on defense. Official NATO figures show Canada spent an estimated 1.37% of GDP on defense in 2024, up from an estimated 1.31% in 2023. That is short of NATO's 2% target, which incoming Prime Minister Mark Carney has vowed to meet by 2030. It is not as low as Trump claimed. However, Canada ranks 7^th highest in actual money spent among NATO's 32 countries. Tariffs make it harder for Canada to increase its defense spending.

President Trump claims he's targeting Canada because he's concerned about Canada’s supposedly lax approach on the border to fentanyl and migrants. It was the initial false excuse for using emergency powers. Otherwise, it would take an act of Congress.

Data shows Canada has more reason to worry about what's going north into Canada from the US. There's been an influx into Canada of illegal aliens, drugs, and guns, which fuels crime, death, and addiction. Canadian officials seized more illicit drugs coming from the US last year than what the Americans captured on their side of the 49th parallel. Criminal activity is a concern on both sides.

The Canadian Border Services Agency measures cannabis, hashish, cocaine and crack, heroin, some opioids (like opium, methadone, and morphine), and drug-related precursor chemicals seized in grams. Transnational criminal organizations profit from substances that cause great harm to both countries. Canada lives next door to the largest weapons market in the world, and the largest drug market in the world. Capacity creates its own demand, and since the US is such a huge market for general crime that is without adequate suppression enforcement, nefarious opportunities are filled by criminals.

In response to crime coming to Canada, as well as Trump's complaints, Canada assigned an additional $ 1.3 billion for border enforcement to assuage US concerns about drugs and migrants. However, the real benefit is for the public safety of Canadians in terms of having additional resources to interdict illicit firearms and a host of other drugs coming north.

Canada is not a significant source of drugs entering the U.S.  Less than one percent of all fentanyl seized in the US comes from Canada.

In conclusion, Trump's goals are simple but challenging to achieve with his ham-fisted method. Cultures do not respond well to threats and aggression. Sometimes, tariffs help discourage bad behaviour, such as foreign dumping of goods below cost to dominate and control a market.

However, blanket tariffs against years of developed supply chain efficiencies hurt everyone and will not result in a new era of "made in the USA."

Additionally, the USA has ruined its international reputation as a reliable partner and treaty keeper, as trust has evaporated. Instead of professionally negotiating over problem inequities and disparities, the USA is alienating the partners it needs for resources and the customers it would like to have for its products.

The path the USA is on will devolve into isolation and economic stagnation. International evil tyrants will be emboldened, and the world will become a more dangerous place. Disturbing the world economic order to such a degree will possibly give rise to new forms of terrorism onto American soil. The future looks dark.

Source Significantly from  Daniel Dale, CNN March 12/25 and varied internet articles.