Canada has retaliated with sweeping counter-tariffs on US goods after President Donald Trump’s administration confirmed it would press ahead with levies on Canadian and Mexican imports. Prime Minister Justin Trudeau announced the move late Monday, vowing that Canada “will not let this unjustified decision go unanswered.”
The countermeasures, echoing a plan first revealed in February, include an immediate 25% tariff on C$30 billion ($20.6 billion) worth of US exports. A second, much larger wave targeting C$125 billion worth of goods, including automobiles, steel, and aluminum will take effect in three weeks unless the US reverses course.
Trade War Erupts as Trump’s Tariffs Take Effect
The long-feared trade war officially began when Trump signed an executive order imposing 25% tariffs on most Canadian and Mexican imports, with an additional 10% levy on Canadian energy products like crude oil, natural gas, and uranium. The move, which had been looming for months, left little room for negotiation.
With US-Canada trade valued at over $900 billion annually, the tariffs threaten to disrupt one of the world’s largest bilateral economic relationships. The immediate impact was felt on financial markets, with the Canadian dollar and stocks plunging. The S&P/TSX Composite Index tumbled 1.5%, its worst drop since December. Meanwhile, traders now see an 80% chance that the Bank of Canada will cut interest rates by 25 basis points at its March 12 meeting to cushion the economic blow.
“Our tariffs will remain in place until the US trade action is withdrawn,” Trudeau declared. “And should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures.”
Canadian provinces are also preparing their own retaliatory actions. Ontario Premier Doug Ford warned that his province could cut off nickel exports to the US potentially crippling American manufacturing. “Fifty percent of the nickel you use is coming out of Ontario,” he said. “If they’re going to try to annihilate Ontario, I will do everything including cutting off their energy with a smile on my face.”
In addition, Ontario and other provinces have pledged to restrict US companies from bidding on government contracts, a move that could cost American firms billions in lost business. Ford confirmed that Ontario would immediately cancel its contract with Starlink, Elon Musk’s satellite network.
The Canadian government has warned that the escalating trade war could slash the country’s economic output by 3% over the next two years, with businesses and consumers bearing the brunt of higher costs. “Demand for Canadian goods in the US will drop, production will be cut, jobs will be lost, and prices for US imports will rise,” the Bank of Canada cautioned in a recent report.
Meanwhile, US businesses are also feeling the heat. “We will have a long road back to Canada and the US being trusted economic partners again,” said Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce. “Businesses can’t just switch their whole model to avoid tariffs and then go back again, depending on what politicians decide on any given day.”
Trump has justified his tariffs by accusing Canada of allowing fentanyl to flow across the border, a claim Canadian officials strongly deny. US data indicates that less than 1% of seized fentanyl originates from the northern border.
In response, Trudeau’s government has unveiled a C$1.3 billion border security plan including increased aerial surveillance through helicopters and drones. The plan also proposes a North American joint “strike force” to combat fentanyl trafficking. Additional personnel will be deployed along the border, and a new “fentanyl czar” has been appointed to oversee the crackdown.
In recent weeks, Canadian officials, including Foreign Minister Mélanie Joly and Immigration Minister Marc Miller, have made repeated trips to Washington in a bid to convince Trump’s team to rethink the tariffs.
“There’s a level of unpredictability and chaos that comes out of the Oval Office, and we will be dealing with it,” Joly admitted.
Miller acknowledged that the tariffs will be painful but emphasized that the US has just as much to lose. “Thirty-five US states count Canada as their top trading partner. This will hurt them too. We hope logic will prevail.”
With neither side showing signs of backing down, the trade war is set to escalate further. If the US refuses to withdraw its tariffs, Canada’s countermeasures will only intensify, putting pressure on American businesses and consumers.
As Trudeau prepares to leave office, his final act may be steering Canada through one of its biggest trade battles in recent history. Meanwhile, all eyes are on Trump to see whether his aggressive trade policies will trigger broader economic consequences.