MNI BRIEF: Canada Retaliates Against US Tariff, But No Oil Tax
MNI (OTTAWA) - Prime Minister Justin Trudeau said Saturday Canada will retaliate against U.S. President Donald Trump's tariffs with a 25% levy on CAD155 billion of goods, a trade war between two of the world's largest economic partners unseen in generations.
Trump's decision earlier today to set a 25% tariff on Canadian products except for a 10% levy on energy “puts in peril a historic economic relationship” Trudeau said. The two nations trade more than USD1 trillion each year.
Canadians should curb purchases of U.S. products and reconsider vacations there, Trudeau said, also warning Americans the dispute will raise gasoline prices and imperil jobs in the auto industry. Non-tariff penalties in areas such as energy and critical minerals are also being considered, though Trudeau stopped short of announcing an energy export tax.
Some investors bet Trump would back off threats of broad tariffs and his move creates potential for escalation with China and the European Union, tensions the IMF warns could trip the global economy. Most economists say tariffs will boost inflation pressure in the U.S. and abroad and trigger a recession in Canada, which sends three-quarters of its exports to its southern neighbor.
Canada's dollar reached the lowest in years as Trump pledged penalties he says will rebalance unfair trade and pressure Trudeau to boost border security and military spending. Trudeau and others point out that American customs data shows Canada accounts for less than 1% of illegal migrants and fentanyl entering the U.S., while Canada has already accelerated plans to reach NATO's target for 2% of GDP going to defense. (See: MNI INTERVIEW: BOC To Cut Faster And Deeper In Trade War) "We've solved big issues before and we'll solve them again," Trudeau said.