The week that rocked global trade

Here’s?what we’re following in cross-border news, from the ins and outs of an extraordinary week and insights?from the frontlines in Washington to a call for?action?in?the?Arctic.?

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No room for compromise?

The week that shook Canada and quite possibly upended the system of global trade began at midnight, Tuesday, March 4. To recap:??

After months of will-he, won’t-he uncertainty, U.S. President Donald Trump on Monday announced that threatened tariffs against Canada and Mexico would be brought into effect the next day.?

The 25 percent tariffs apply to Canadian goods entering the United States, a move that ends a decades long partnership of free trade between the two countries and launches a trade war of extreme proportions.??

The President’s press conference confirmation that there was "no room left"?to negotiate was, tellingly, made alongside the CEO of the Taiwan Semiconductor Manufacturing Co.??

The chip manufacturer has tentatively committed at least US$100 billion to build fabrication plants in the U.S. That announcement provided a useful backdrop to Trump’s Made in America mantra, one that appears to have a car-first focus.?“What they’ll have to do is build their car plants, frankly, and other things in the United States,” Trump said of industry broadly,??

What became increasingly clear as the clock ticked down to midnight was that no amount of success in curtailing fentanyl and migrant flows from Canada — the so-called emergency legal pretext deployed by Trump to challenge the free trade agreement — was going to matter.??

Addressing reporters midday Tuesday, Prime Minister Justin Trudeau was unequivocal: “What he wants to see is a total collapse of the Canadian economy, because that’ll make it easier to annex us,” he said of Trump.???

Trump’s move triggered the Canadian government’s already set $30 billion in retaliatory tariffs on U.S. imports, ranging from citrus to poultry to tires. The scope of targeted tariffs will be increased to $155 billion in 21 days’ time.??

Responding on Truth Social, Trump wrote, “Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!” Reaction has been wide-ranging.

• Writing in The Globe and Mail, Michael Byers, who co-directs the Outer Space Institute, argued that Canada should cancel its purchase of F-35 jets from the U.S. "If the United States wished to invade Canada, it could achieve air superiority — perhaps with just a few keyboard strokes."
• PPF Fellow Steve Verheul , who was Canada's chief trade negotiator during the CUSMA negotiations, said in an interview with POLITICO that "I don’t think there’s any value in Canada showing any interest in any kind of review of the (USMCA)?agreement." He announced he is co-launching the Coalition for North American Trade, a three-nation business group advocating for the long-term benefits of free trade.
• In an editorial, The Wall Street Journal called the move the?“dumbest tariff plunge.”
• At The Hub, David Frum argues that America is destined to become "an economic island." “[Trump's]?idea of how you get rich is you go to the next village, you burn down all the huts, and you take their stuff.” The response must be?“giving [Trump] a shock back so he is stunned into stopping his rampage.”
• Laurence Martin in The Globe writes?“there are also reasons to be hopeful that Canada will survive this trade war and emerge as a stronger, more independent and more unified country.” He adds: “As Americans get a sense of how our measures can affect their?economy, a side effect of the trade war will be that we will be taken for granted less by the megapower. This current crisis is putting more focus on Canada south of the border than anything else I can remember.”

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The view from Ontario

“Was it a smoke screen? Absolutely it was a smoke screen.”?

Ontario Premier Doug Ford quickly agreed with the Prime Minister’s assessment that no amount of negotiation with the Trump White House was going to alter this outcome. Saying that Trump had chosen chaos over economic reason, Ford retaliated by ordering the removal of U.S. wine, beer and spirits off the shelves at the province’s LCBO outlets — a billion-dollar business — and announced that provincial procurement would henceforth preclude U.S. bidders, while calling on municipalities to do the same.??

Saying he was prepared to dig in for a long fight, Ford added that he was putting the governors of Minnesota, New York and Michigan on notice that should the trade war escalate he was prepared to apply a 25 percent surcharge on exported electricity, before adding,?“We will not hesitate to shut off their power as well.”?

Top of mind was the automotive sector. Cars and trucks are the second largest Canadian exports to the U.S. by value, with auto parts passing back and forth across the border multiple times. The auto sector has fought hard in recent years to win back plants and contracts, a resurgence that contributed $14 billion to Canada’s GDP in 2022 and that’s now clearly under threat.?In one of the starkest assessments, Premier Ford predicted assembly line shutdowns within a 10-day time frame.?

Throughout the beginning of the week, the U.S. auto industry made clear it wasn’t giving in. “We continue to believe that vehicles and parts that meet the USMCA’s stringent domestic and regional content requirements should be exempt from the tariff increase,” wrote Matt Blunt , president of the American Automotive Policy Council .?The pushback would soon pay off, somewhat (see below).

Ford’s man in Washington

For months Ontario has been busy pressing its?case in Washington, via its representative there, David W. Paterson . He’s a former VP at 通用汽车 and 黑莓 , and was chair of the Canadian Chamber of Commerce , so he knows a thing or two about what’s at stake. On our podcast WONK, he spoke with host Amanda Lang about what he’s seeing in Washington and outlined his strategy for winning over Republican lawmakers:???

“I like to do the border walk when I bring people into my office, big map of the United States. And we just walk from the wood of the Western border through the oil and gas of Alberta, the uranium, the potash, the critical minerals, the electricity and all of those things,” he said. “So what do you need? You need nuclear power. Where do get that? Or critical minerals, which you can't really build military equipment, ammunition, et cetera, without. And the only major source in the West or, frankly, the whole world of high-grade nickel comes from Sudbury, Ontario. Part of the education is to say, ‘Look, we have what you need. We'd like to sell you more. We'd like to use your capital to develop some of the supply chain that's needed in that because that's what you have in the United States and we can develop those things together.’ And every Republican that I've met for the last year kind of likes that and sort of says, ‘Yeah I want to do those things.’”??

Paterson also outlined what he thinks is really motivating Trump on tariffs: the revenue America needs to avoid tax hikes. "We saw a bit of a taste of it in the State of the Union last night. What are people in Congress focused on with the new administration? Of course, Make America Great Again. Bring manufacturing and investment back to the United States and that's a core driver. But another really important core driver ... the American deficit is $2 trillion,” he said. “It's something that they do want to address and certain members of the Republican party, which has a narrow two-seat majority in the House of Representatives, are absolutely determined that they will not increase.”??

The notion that tariffs will fix the problem is “perhaps magical thinking,” said Paterson. “The president says [tariffs] are paid for by foreign governments, but we know that's not the case."

Hear ye, hear ye

Addressing Congress Tuesday night Trump reiterated that the word tariff is a “beautiful word,”?and all but confirmed that Honda will build its next generation Civic not in Mexico, as planned, but rather in Indiana.?That decision, scooped by Reuters , was predicated on the automaker’s determination to avoid tariffs on one of its top-selling cars.??

Trump was clearly chuffed. “It’s going to boom,” he said of the auto industry in the U.S. “It’s going to boom.” The president added that he intends to make interest payments on car loans tax deductible for cars made in the U.S.

Can we talk this over?

While Trump gave no hint of any further negotiations on the tariff front, U.S. Commerce Secretary Howard Lutnick stirred the pot once again by telling Fox Business that there was wiggle room. “Both the Canadians and Mexicans were on the phone with me all day today trying to show that they’ll do better,” Lutnick said Tuesday evening. “And the president’s listening. ... I think he’s going to work something out with them.”?

This “meet you in the middle” tactic seemed not to fly with Dominic LeBlanc, Canada’s minister of intergovernmental affairs, who told CBC Radio Wednesday morning that “we’re not interested in meeting in the middle and having some sort of reduced tariffs.”

And then a break point

It seemed fittingly chaotic that mid-day Wednesday, the president granted a one-month tariff exemption to the Big Three automakers. ?

The industry had loudly complained that the tariffs would, as Ford Motor Co.’s James Farley put it, “blow a hole” in the American auto industry and favour offshore automakers.?

White House press secretary Karoline Leavitt relayed that Trump told the automakers to “get on it, start investing, start moving, shift production here to the United States of America, where they will pay no tariff. That’s the ultimate goal.”?

Meanwhile, what is potash anyway?

Addressing reporters Tuesday, New York Governor Kathy Hochul said she agreed with the analogy that getting a handle on the real impact of the tariffs was like playing billiards on a sailing ship. ?

“Po-tash,” Hochul said to those gathered, enunciating a long “o” as in potato. “Who knows what potash is?” She went on to explain that potash is the most important element in fertilizer and that in New York state, 100 percent of it comes from Canada. Republican Senator?Chuck Grassley, from Iowa, also weighed in on X:?“I plead w [sic]?President Trump to exempt potash from the tariff because family farmers get most of our potash from Canada."?

Agricultural tariffs are due to land April 2.?

Writing on Truth Social Monday, Trump turned his attention to spring. “To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd. Have fun!”

Canada's Arctic strength

At a time when the Arctic is increasingly seen as a strategically important region —?economically and militarily —?Canada has been ignoring a key asset, notes Natan Obed, president of Inuit Tapiriit Kanatami. ?

“The composition of Canada’s hockey team roster in the 4 Nations Face-Off has been a continuing debate for the past year. The lack of consideration for Inuit participation in the political Team Canada is metaphorically akin to Hockey Canada not understanding that Sidney Crosby is Canadian, and that he would be eager to play for us,” he writes in a recent op-ed.?

America wants more Arctic territory (see Greenland). China has spent billions buying influence in the region. Denmark, Norway and Sweden have developed?energy projects in their Arctic regions. “Canada’s Arctic region, by contrast, is held back by a frontier mentality that has left our communities racked by power outages, boil-water advisories and astronomically high food costs,” says Obed. ?

He concludes that it’s time to prioritize bringing Inuit Nunangat into Canada through major investments and start acting like an Arctic power.?

By Jennifer Wells

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