President Trump honoured the promises made during his 2024 election campaign to combat fentanyl and illegal immigration coming through the northern border by implementing a massive 25 percent tariff on February 1, however, this was followed by a series of tumultuous events for the two nations. Shortly after the declaration of added taxes, Prime Minister Justin Trudeau held an emergency meeting with cabinet ministers and later met with Canadian premiers to discuss retaliatory options. The country’s countermeasures included imposing a countervailing 25 percent tariff on $30 billion worth of goods from products imported from the U.S. Two days later, Trump announced a 30-day pause on tariffs, however, analysts pointed out that this doesn’t mean the trade war is officially over. During this period, Trudeau will “appoint a fentanyl czar, list cartels as terrorists, ensure 24/7 eyes on the border, launch a US-Canada Joint Strike Force to combat organized crime, fentanyl and money laundering.” Trudeau posted on X saying “I have also signed a new intelligence directive on organized crime and fentanyl and we will be backing it with $200 million.”
The threat of a trade war shed light on the instability of Canada’s economy, while raising questions about the future of Canadian-American relations. After the month-long negotiation period, if the tariffs were to be imposed, companies would most likely raise product prices to compensate for additional taxes, putting strain on buyers in an already fragile economy. According to a statement released by the Bank of Montreal, Canada will go into a recession after a year of higher tariffs. This will decrease economic growth until it is nearly flat (roughly 0 percentage points). Inflation is expected to increase by 0.7 points above baseline due to a weaker Canadian dollar as the loonie would fall to 64.4 cents as analyzed by specialists at the Conference Board of Canada. However, the United States won’t feel the impact as much as their neighbouring countries, as imports and exports only make up a quarter of American GDP compared to the 70% that makes up Canadian GDP. Nonetheless, sectors such as the automotive, food and energy industries in America would be hit particularly hard. Gas prices could rise 50 cents as Canada supplies more than 70 percent of crude oil, while America imports more than half of their auto parts from Canada and Mexico. Grocery prices would increase more than 60 percent as Mexico supplies more than 60 percent of fresh produce to the States including fruits and vegetables.
The trade war threats have prompted specialists to analyze the future of Canadian-US relations. According to Lana Payne from Unifor- Canada’s union in the private sector- these warnings have caused Canadian officials to examine their country’s economic and political state and review trade policies. She added that Canadians “no longer have a friend the way [they] thought they did, and a stable trading partner.” During a news conference where Trudeau announced Canada’s retaliatory measures, he accused the President of “splitting” the two countries which have been close trading partners for centuries. “If President Trump wants to usher in a new golden age for the United States, the better path is to partner with Canada, not to punish it,” said the Prime Minister.
The future of relations hangs in the balance, as citizens have lost trust in their nations in a fragile economy. After centuries of productive trade, the tension between Canada and America has changed the lives of buyers in these tumultuous and uncertain times. Discussions between the nations are ongoing, leaving everyone anxious to know what the future looks like for the two trading partners.
Written by Suriya Rampersad
