How will Canada respond to Trump Tariffs without a Prime Minister?
Canada as the 51st State? Huh.
"If Canada merged with the U.S., there would be no tariffs, taxes would go way down, and they would be TOTALLY SECURE from the threat of the Russian and Chinese ships that are constantly surrounding them. Together, what a great Nation it would be!!!" — President-elect Donald Trump, January 6, 2025.
President-elect Donald Trump's recent suggestion that Canada should become the 51st state of the U.S. has sparked controversy around the world and especially among Canadians. This statement, along with his threat to impose a 25% tariff on Canadian goods, challenges Canada's sovereignty and economic stability.
Historical Threats to Canadian Sovereignty
Trump made unprecedented remarks with their directness. But this isn't new to Canada and alomst expected based on Trump's negotiation style. Canada has faced challenges to its sovereignty in the past but it's been a lifetime or two. In the War of 1812, American forces tried to invade Canada. They were repelled. In the mid-19th century, some wanted to annex Canada to the US. But, these movements did not succeed. But, in recent history, no U.S. leader has suggested annexation. So, Trump's comments are particularly provocative. Canadian's are not viewing this as a drill, it's sparked some serious conversation on our big brother relationship with the United States.
Justin Trudeau's Resignation and Proroguing Government
Amidst these tensions, Canadian Prime Minister Justin Trudeau resigned on 6 January 2025. He cited conflicts in the Liberal Party and election pressure. He has stated that he will remain in office until they choose a new Liberal leader. Trudeau is far from loved in Canada but the timing is leaving many scratching their heads.
Proroguing government is the formal ending of a parliamentary session. The Governor General does it on the Prime Minister's advice. It does not dissolve Parliament. This means all legislative activity is halted until a new session begins. This is expected to happen in March. Note that, Trudeau's promise to resign and the shutdown of the Canadian Federal Government will not stop any retaliatory tariffs. There is a broad and well supported belief that Canada will retaliate. This is not a drill for Canadians.
"We’re not going to take this sitting down. If they want to put tariffs on our products, we’ll slap tariffs on theirs—everything from orange juice to beer to toilets. This is about standing up for our workers and our industries." - Doug Ford, Premier of Ontario.
Implications for Customs and Trade
The new CARM system from the Canada Border Services Agency has posed a challenge for Canadian importers. New Non-Resident Importers cannot get import-export accounts in the CARM portal furhter hindering US importers sending product to Canada as the importer of record. Activations are not happening at all. There is no rimeline to resolution. This is not a good look for a growing trade deficit with the United States. CARM aims to modernize and simplify tax and duty collection. Its rollout has faced criticism for causing confusion and disruptions. New U.S. tariffs could further distract from existing Canadian trade issues.
Trade Deficit and Key Import/Export Statistics
Canada and the US have strong trade ties with much cross-border exchange. Here is a breakdown:
The de minimis threshold is the minimum value for duty-free goods. People overlook the US's high de minimis value of $800 and Canada's FTZ status. Experts believe it boosts the volume and value of shipments from Canada to the United States. These factors can affect trade balances. They often spark debate in trade talks but have been highly untouched in public comments by either country.
Comparing the Authority of U.S. President vs. Canadian Prime Minister
In the US, the President can impose tariffs and set trade policy, often with little oversight from Congress. This executive power allows for swift implementation of protectionist measures. In contrast, the Canadian Prime Minister has less power. They must work with Parliament to set trade policies and address global economic threats. This legislative process can lead to slower response times in urgent situations. But it is expected that Canada will respond in a timely manner.
Role of Global Affairs Canada and Parliament
Global Affairs Canada manages Canada's diplomatic and consular relations. It promotes international trade and leads development and humanitarian aid programs. With potential U.S. tariffs, this department must advocate for Canada's interests worldwide.
Parliament, made up of the House of Commons and the Senate, is the legislative body. It debates and passes laws, including those on trade and economic policy. Parliament must create a united response to external economic pressures. It must ensure any measures taken are in Canadians' best interests. They have their work cut out for them.
Historical Precedents: Trade Disputes Between Canada and the U.S.
Canada and the US have a history of trade relations. Although rare, it does include tariffs and retaliatory measures.
USMCA or CUSMA is NOT a safety net against these tariffs. It will have little to no role moving forward.
Conclusion
Canada has long supported free and fair trade. Canada advocates for open markets and mutual economic growth. In contrast, the US, under President-elect Trump, seems to be embracing protectionist trade policies. History shows that such divergences can disrupt economies and strain diplomacy.
Canada must assert its sovereignty and strengthen its trade ties. It must also develop policies to protect its economy. This is vital. Canada's success in past trade disputes shows its resilience.
The pilot has put the fasten seatbelts sign on. Buckle up, we're in for some turbulence, but we will have a safe landing.