Canada has announced retaliatory tariffs on $19.9 billion worth of American goods, effective September 8, in response to the US imposing 50% tariffs on $20 billion of Canadian products. These Canadian counter-tariffs will range from 15% to 50% and will target over 700 products, including steel, dairy products, appliances, agricultural equipment, seafood, cheese, clothing, cosmetics, and toilet paper. This move comes after trade negotiations between the two countries abruptly collapsed.
Economists and analysts are expressing concern over the escalating trade war between these two historically close allies. Experts like Daniel Béland, a political science professor at McGill University, suggest that the "old Canada-U.S. relationship is over" and that Canada can no longer trust the Trump administration. The US had previously imposed 50% tariffs on Canadian products worth $20 billion, only days after a deal was announced.
The retaliatory tariffs by Canada are expected to impact border states in the US, particularly those with upcoming midterm elections. The US economy is significantly larger, about 10 times that of Canada's, which limits Canada's ability to retaliate dollar for dollar without facing substantial economic strain. Despite this, Canada maintains a trade surplus with the US of $7.1 billion, according to Statistics Canada.
To mitigate the financial risks for its businesses, the Canadian government has also announced a new $5.42 billion funding package aimed at assisting small- and medium-sized enterprises affected by the tariffs. The US tariffs are expected to lead to higher prices for American households on 550 consumer goods imported from Canada, with a report from the Kiel Institute for the World Economy indicating that US importers and consumers absorb 96% of the tariff burden.
Financial markets have shown a mixed reaction, with gold prices remaining largely flat at $4,696 per ounce, and the US dollar slightly down by 0.04% to 98.96. The Canadian dollar index, however, has seen a comparable rise of 0.04% to 72.27. On Wall Street, the Nasdaq is up 0.5%, the Dow Jones Industrial Average is flat, and the S&P 500 is up 0.2%, while in Toronto, the S&P/TSX Composite Index is up 0.6%.
