President Trump destabilised the North American economy by putting 25% tariffs on all Canadian and Mexican imports, except 10% on energy imports. Trump’s announcement of 25% tariffs, starting on February 4th, 2025, on America’s most loyal economic partners made the stock markets plunge when the news was heard. For instance, the Dow Jones Industrial Index dropped on Wall Street, and the Canadian dollar lost some value following the news. The U.S., Canada, and Mexico have a long history of trade, and the three economies are fully integrated together. U.S. President Reagan told Americans in a 1982 radio address that “free trade serves the cause of economic progress, and it serves the cause of world peace.” Thus, President Reagan strongly believed in the benefits of removing trade barriers between nations for the cause of world peace and economic development. Years after this statement, Reagan and Bush removed most of the trade barriers between the U.S., Canada, and Mexico, which made one of the world's largest trade blocs, accounting for 30% of the global economy with a $31 billion normal GDP. Nowadays, President Trump wants to end this great friendly economic cooperation between the three North American nations. Trump intends to end Reagan and Bush’s legacy of an economic world made of free trade deals. The new president dreams of replacing the federal income tax with tariffs. In short, Trump sees tariffs as a modern way to raise government incomes without directly taxing the population. Nevertheless, Trump claims that the reason why he put tariffs on Canada is because of the fentanyl crisis, despite the fact that only 0.2% of fentanyl is smuggled into the U.S. Still, the true reason why Trump put tariffs on Canada is still unknown, and this is either to replace the federal income or to use economic force to annex Canada into the Union of the United States of America. In the short term, Trump will make Canada and Mexico pay tariffs to subsidise federal income tax cuts as promised during his election campaign. However, Canada has developed a robust economic response to the Trump trade war through similar tariffs.
To begin with, President Trump said several times that tariffs is the most beautiful word in the English dictionary. For that reason, he renamed Mount Denali by Mount McKinley, a U.S. president who loved raising tariffs. U.S. President William McKinley once said, “I am a tariff man, standing on a tariff platform.” The president was a man from a late 19th-century generation, and his political views and ideals are outdated by modern standards. Still, President Trump seems to be a man from the past, a politician completely disconnected from the 2020s America. Trump does not know how to be a statesman who governs a nation with stability, honour, and good diplomacy with other nations. Regrettably, the president just signed an executive order to put tariffs on Canada and Mexico, invoking the National Emergency under the 1977 International Emergency Economic Powers Act. Section 202(a) of this piece of legislation states that “any authority…President…may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Acting upon the powers granted by the National Security Act, President Trump used the fentanyl crisis to override the 2018 United States-Mexico-Canada Agreement and put substantial tariffs on all Canadian and Mexican imports. Nevertheless, Trump’s tariffs on Canada have nothing to do with fentanyl; the U.S. President’s goal is to promote local businesses and to coerce Canadians to do whatever he wants them to do. Professor Mohamed El Erian from Queen’s College Cambridge University told Channel 4 News that Donald Trump uses trade tariffs as a tool to get other countries to do what he wants them to do, as a tool to raise lots of revenue, and as a tool to promote domestic companies. Besides, Trump dreams of the time when tariffs could replace the federal income tax, and he wishes that Canada would join the Union of the United States as a U.S. state. Trump could have decided to put very high tariffs on Canada for territorial expansion, and if tariffs do not get Canada into the Union, tariffs will be used to cut federal income tax.
Unfortunately, Trump’s tariffs will plunge Canada into a dreadful economic recession. For instance, on January 21st, 2025, John Paul Task from CBC reveals that "a 25 percent tariff would be particularly devastating to Canada. Experts have said just a 10 percent levy would shave billions of dollars off the GDP and potentially plunge the country into a painful recession requiring government stimulus to prop up the economy. According to a 2025 analysis from the Canadian Chamber of Commerce, a 25% tariff could decrease Canada’s GDP by 2.6%, and Canadians will have to pay an extra $1,900 every year. In contrast, American households will pay $1,300 on a yearly basis, and tariffs will shrink America’s GDP by 1.6%. The Canadian economy will greatly suffer from Trump’s tariffs. In contrast, ABC News reveals on February 1st that Trump’s tariffs will cost Americans U.S. $830; gas will go up by U.S. $0.70 a gallon in America.
On the other hand, Canada could quickly recover from this economic recession by reorganising its economy more towards trading with Europe and Asia rather than the United States. For instance, Mitchell Sharp, the Canadian Secretary for External Affairs, under the Pierre E. Trudeau government, advocated for the Third Option as a way to diversify the Canadian economy through exporting more to non-U.S. countries. Secretary Mitchell Sharp describes the goal of his trade policy as to "develop and strengthen the Canadian economy and other aspects of its national life and, in the process, reduce the present Canadian vulnerability." Sharper promoted greater Canadian ownership and a diversification of international trade for Canadian businesses. The Pierre E. Trudeau government idealised a business world of self-sufficiency for Canada. However, the Third Option to lessen Canada’s vulnerability to the United States was never implemented, and years later the Brian Mulroney government fully integrated Canada into the U.S. economy, making the Great North vulnerable to the U.S. Thus, President Trump decided to take advantage of this vulnerability as a leader bullying dependable nations.
Nowadays, Canada has developed its own plan to face the current U.S. tariffs; therefore, the Canadian Prime Minister intends to unleash unprecedented retaliatory tariffs against the United States of America soon after Trump’s tariffs become effective on Tuesday, February 4th, 2025. Ottawa will put dollar-for-dollar retaliatory tariffs in place and the immediate on both sides of the border. The Trudeau government has prepared a very robust, rapid, and strong response to the Trump tariffs. Canada’s plan to impose tariffs is similar to the pandemic response of 2020. In short, the Trudeau government is thinking about making a pandemic-sized stimulus package to help businesses, but the scope of the relief program will depend on the size of Trump’s tariffs. Still, the Trudeau government will unleash a series of social programs to help Canadians to face Trump’s tariffs. Canada will go full steam to subsidise economic emergency programs to keep Canada’s economy afloat.
In addition, Canadian Prime Minister Justin Trudeau is ready to deploy any measure to try to force Trump to reverse course. The strong and robust Canadian response has been developed by the Trudeau government and a panel of experts. This plan consists of three rounds of retaliatory tariffs put on U.S. imports. Right after Trump put tariffs on Canada, the Trudeau government will levy tariffs on $30 billion worth of American goods. On February 21st, Ottawa intends to add an extra $127 worth of tariffs on U.S. imports if Trump does not back down on his trade policy. Canadian, Mexican, Chinese, and Trump’s tariffs will make Americans pay more on beer, wine, vegetables, clothing, shoes, household appliances, furniture, and sporting goods, according to Prime Minister Justin Trudeau. The Trudeau government wants Americans to feel the pain caused by Trump’s tariffs; the Prime Minister told the media that Canada will not back down and that his government will do whatever it can to protect Canada’s economy from unacceptable economic decisions made by President Trump. Moreover, Trudeau could consider using the "nuclear option," which is a crude oil ban and cutting electricity supply to the U.S. Cutting the energy supply could drastically hurt the American economy, and Trump might rethink his tariffs afterward.
Moreover, the Government of Canada will announce a “Buy Canadian” program to help Canadians to replace their usual American products. Canadians will be encouraged to buy Canadian goods rather than American goods. Besides, Ottawa will have to find creative ways to stimulate the Canadian economy, which could be deeply hurt by Trump’s tariffs.
Correspondingly, the executive order implementing the tariffs on Canada specifies that if Canada retaliates with tariffs on U.S. imports, the Trump administration will increase tariffs on Canada. It is written in the 14192 Executive Order that “(d) Should Canada retaliate against the United States in response to this action through import duties on United States exports to Canada or similar measures, the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.” This executive action shows how disloyal Donald Trump is with America’s most loyal allies, and this reveals that President Trump is not a serious head of state, and he cannot be trusted by other nations. These tariffs imposed by Trump upon loyal nations show the world that America has decided to isolate itself from the world.
Finally, Canada failed to convince Trump to reverse his plan to put tariffs on them. Accordingly, Ottawa prepares to unleash its plan to retaliate against the trade war with America on Tuesday, February 4th, 2025. The Trudeau government will go full steam by putting tariffs on all U.S. imports in the upcoming weeks if Trump does not back down over his trade policy. The Prime Minister and 9 premiers are all united to go as far as banning electricity and crude oil supply to the United States of America. Canada will respond dollar-for-dollar, and the nation will not get bullied by U.S. President Trump. All economists think that tariffs are bad for the economy of every country involved. Moreover, Trump uses tariffs to coerce nations to do whatever he wants them to do; however, for Canada, Trump might use tariffs to annex Canada to the United States of America as a U.S. state. He uses tariffs to coerce the Canadian nation to give up its political, economic, and political sovereignty and have no choice but to be part of the U.S. Trump knows that Canadians will never accept being part of the U.S., but the president is simply testing the scope of his presidential power to see how he can expand the U.S. territory, bring back businesses to America, and raise new revenues to cut taxes. On the other hand, Canada will have to lessen its economic relations with the U.S. by trading with several nations rather than with the U.S. Pierre E. Trudeau’s options to diversify the Canadian economy and trade partners must be adopted by Canada. Canadians can no longer rely on doing business with America because President Trump does not respect America’s traditional friends and allies. The Canadian businesses will need to export more to the United Kingdom and the European Union, which already enjoy free trade deals with Canada. Trump made the Government of Canada realise that it needs to reorganise the national economy towards Europe and Asia rather than relying exclusively on the United States.
February 2, 2025