Canadian government already bracing for potential Trump tariffs

Canada is bracing itself for the possibility of former U.S. president Donald Trump swiftly imposing a broad tariff on all U.S. imports if he is re-elected on Tuesday. This move could potentially spark a damaging trade dispute between the two countries. Canadian officials have had conversations with multiple Trump allies, but received no reassurances ahead of the upcoming election.

Trump’s proposal for a minimum 10 per cent global tariff has raised concerns in Ottawa, with one official privy to the details of the talks reporting that Trump is committed to imposing tariffs quickly. Robert Lighthizer, Trump’s former trade representative, has been telling people that Trump would impose across-the-board tariffs promptly, emphasizing his belief in tariffs as a policy tool.

Canadian officials have consulted with contacts who were part of Trump’s Treasury Department and trade office to better understand how this situation might unfold. Concerns remain unaddressed, with Trump’s supporters avoiding offering any assurances amidst the tight election race.

There are mixed interpretations of Trump’s intentions. While some believe the tariffs would only apply to specific products as a negotiating ploy, others, like Lighthizer, suggest that across-the-board tariffs will be implemented quickly. Canadian business groups that met with Lighthizer did not come away reassured either.

The potential damage to Canada from these tariffs is estimated to be significant, with some experts warning of a devastating five per cent loss in GDP if a trade war ensues. Canada’s trade-driven prosperity could be severely impacted, with one-quarter of all Canadian exports to the U.S. being energy products.

In the event of Trump’s re-election, Canadian officials are preparing to make the case that broad tariffs on Canada would risk inflation in the U.S. and could have dire economic consequences. Trump may initially announce tariffs, but their implementation would likely happen gradually as he engages in trade negotiations.

Regardless of who wins the White House, Canada will face pressure to boost military spending, with a potential Trump administration being more stringent in its demands. Canada is advised to make itself indispensable by developing critical minerals resources and be prepared to play hardball in trade negotiations.

While Canada has hinted at potential retaliation, a trade battle with the world’s largest economy is expected to have repercussions. However, much of this uncertainty could be resolved if Trump loses the election. In the case of a Kamala Harris presidency, Canada would still face trade disputes, but the administration is expected to be more predictable and easier to deal with compared to Trump.