What to know
- Donald Trump has announced 50% tariffs on some Canadian exports using Section 338, a 1930s trade law.
- A University of Toronto trade expert estimates only about five per cent of Canadian exports to the U.S. will be affected.
- Most Canadians are unlikely to see higher prices unless Canada responds with counter-tariffs.
- The move may be aimed at increasing pressure ahead of future CUSMA negotiations.
President Donald Trump levied a 50 per cent tariff on Canadian exports through reviving an obscure 1930s act, but trade expert Joseph Steinberg says the measures are expected to affect only a small share of trade between the two countries.
The United States President signed an executive order reviving Section 338 of the Tariff Act of 1930 to impose a 50 per cent tariff on Canadian goods — many that are currently protected under the Canada-U.S.-Mexico Agreement (CUSMA).
Section 338 is a piece of legislation from the Great Depression-era that has never been enforced before. Trump revived the bygone law due to a belief that Canada is discriminating against American products.
The three proclamations Trump signed each cover a different grievance he has against his neighbour up north: dairy, alcohol, and the auto sector. However, the latter is a bit of a misnomer. The products covered under the auto grievance include animal byproducts, flowers, vinyl flooring, jewellery, and more.
Will Canadians pay more?
Although the number may seem economically devastating on paper to the average Canadian, Joseph Steinberg, a professor of economics at the University of Toronto well-versed in tariffs and trade policy, said there’s not much need to worry.
By his calculations, only about five per cent of domestic exports to the U.S. will be affected.
“It is important to mention that this slate of tariffs is not going to be hugely economically disruptive on either side of the border,” Steinberg explained.
“This 50 per cent headline number is big, but my calculations indicate that only about five per cent of our exports to the US would be affected. Some specific products are obviously going to get hurt. But in the grand scheme of things, it’s not actually that big of a deal.”
Why now?
While this new slate of tariffs won’t really disrupt regular life for Canadians, the timing is suspect for a few reasons.
Firstly, Trump’s global tariffs of 10 per cent, which he implemented under Section 122 of the Trade Act of 1974, is set to expire this Friday, July 24. Steinberg said Trump “does have to find some other ways to reinstate his global tariff agenda.”
Second, Trump has been less than pleased with the raging wildfires in Northwestern Ontario that have caused smoke to drift to U.S. states bordering the Great Lakes. The travelling smoke has triggered air quality warnings states including Michigan, Maryland, New York, and Pennsylvania.
He has suggested Canada should compensate the United States over wildfire smoke drifting across the border, comments that have sparked criticism from Provincial and Federal leaders.
“The wildfires could be part of it in that this is probably the single time in the last year and a half where Canada has had — rightly or wrongly — the least amount of goodwill amongst politicians from border states in the U.S.,” Steinberg explained.
“They have largely been very supportive of us over the last year and a half in the trade tensions. Their trade with Canada is important for them.”
This leads to the third possible catalyst for the 50 per cent tariffs. Steinberg pointed out that the U.S. administration would like to see more progress on talks to renew CUSMA.
“Their perspective is that we haven’t been willing to put much on the table, whether that’s fair or not. This is a way to try to maybe get some movement on that.”
It’s been no secret that Trump has had a gripe with the Canadian auto and steel industry, which is why Steinberg thinks the “sectoral tariffs on steel, aluminum and autos” won’t go away completely in a new CUSMA deal.
But regarding this new slate of 50 per cent tariffs, he reiterated that unless Canada or Ontario levies counter-tariffs, the tariffs won’t really affect the prices of regular household goods.
“I don’t view this as something that is going to economically come back around and affect prices here at home, unless we decide to enact our own countermeasures in response and put tariffs on our imports from the U.S. — that’s going to raise prices here at home.”
